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Friday, July 25, 2008

Inflation Continues to Brutalize Putin's Russia

Interfax reports that inflation continues to brutalize Russia far more dramatically than Europe. And remember, this is just the Kremlin's data. The true picture is likely far more bleak than even these appalling numbers indicate.

Inflation on food prices in Russia was almost four times higher than in the EU countries in the first half of 2008, the Federal State Statistics Service (Rosstat) said on Tuesday.

Food prices in Russia grew 1.1% in June (and 12.9% in the first half) compared to 0.3% (3.5%) on average in the EU countries.

The biggest jumps in food prices among EU countries in June were seen in the UK at 2.4%, Portugal - 1.6% and Latvia - 1.4%. Food prices dropped in a number of EU countries in June, mainly due to seasonal declines in fruit and vegetable prices. Food prices were down 3.1% in Bulgaria, 2.1% in Greece, 2.0% in Cyprus and 1.2% in Finland.

In the January-June period, the biggest EU food price increases were posted in Latvia (up 9.6%), Lithuania (8.4%), Finland, Hungary, Estonia, Slovakia, and the UK (up 6.3%-6.9%). The smallest increases were in Malta (up 0.7%), Austria (1.1%) and Greece (1.3%).

Oil and fat prices saw the biggest increase in the EU in June, rising 1%, while prices on meat and meat products rose 0.9% and the cost of fish and seafood grew by 0.8%. Baked goods and cereals grew 0.7% in price.

The cost of baked goods and cereals grew the most in Russia in June 2008 (2.4%). The cost of meat and meat products rose 2.1%, while butter and fat prices rose 1.6%. The cost of vegetables, sugar, jam, honey, chocolate and confectionaries rose 1.4% in June, while the cost of dairy products, cheese and eggs fell 2% and fruit prices dropped 0.8%.

In the EU, fruit prices saw the biggest increase in the half, growing 8.4%. The cost of baked goods and cereals rose by an average of 4.6% in the half, while butter and fat prices grew 4.2%.

Vegetables prices soared 53.5% in Russia in the first half of 2008, baked goods and cereals - 18%, butter and fats - 16.1% and fruit - 13.2%.

2 comments:

Michael said...

This is the exact reason why you can't "freeze" prices. It leads to scarcity and thus higher prices. No matter how much Putin may want to control things, he cannot control the market. The more he meddles in the market, the worse the situation becomes. He has to open the Russian market to foreign goods, especially produce to get control of inflation. Then he must encourage production on a large scale and small scale. This will never happen. His siloviki friends control too much of the Russian market.

Anonymous said...

"This is the exact reason why you can't "freeze" prices. It leads to scarcity and thus higher prices. No matter how much Putin may want to control things, he cannot control the market. The more he meddles in the market, the worse the situation becomes. He has to open the Russian market to foreign goods,"

Imports to Russia have been rising at around 40% the last years. That can hardly be considered a "clozed" market.

"This will never happen. His siloviki friends control too much of the Russian market."

I disagree. Read "A tale of two Russias" in Newsweek.