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Tuesday, October 30, 2007

See it Now: Russian Prices Out of Control

We've previously written much about how Vladimir Putin's dirty little secret, inflation, is poised to bring down the Russia House. Now, the Romir Russian economics agency gives us a glimpse into the horror of inflation at ground zero in Russia, using the example of sunflower oil, Russia's basic cooking fat:

Analysis is based on data from 3 thousand households (about 8100 panelists) from 23 cities of Russia with 500+ population. Main method of data collection utilizes online barcode scanning.


Analysis of price dynamics for sunflower oil is based on data of 5 leading brands. It reveals considerable price growth for vegetable oil in Russia: in September 1 litre of Sloboda oil cost 38 Rbl, while in the first two weeks of October its price jumped up to 52 Rbl. The same is true with Milora brand: in September it cost about 39 while in October – 48 Rbl.

This trend is also true with private brands. Auchan sunflower oil has considerably risen in price during the period under consideration (September – 28 Rbl for 1 L, early October – about 43 Rbl). It is evident that in absolute terms private labels still lag behind federal brands.

If you choose to be governed by a crazed group of KGB spies with no training in business or economics, this is what's going to happen. 17% inflation in one quarter at minimum, up to a whopping 54%. This means that in the space of one year the prices of really good quality sunflower oil could increase by a factor of four in Russia, and that's just one commodity. The Moscow Times now reports that wealthy, resurgent Russia can't afford to leave tariffs in place on these commodities and is considering abolishing them for fear of making the basic staple unaffordable to the mass population.

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