Fruit and Veg Prices Rising Much Faster in Russia Than in the EU

Between January and May 2018, food products became 2.1% more expensive in Russia, while in the European Union, the same products saw prices grow by just 1.1%, according to the Federal Statistics Service (Rosstat).

The most notable difference was recorded in the price of vegetables, which grew by 14.4% in Russia, while in the EU they only increased by 2.7%. Meanwhile, fruit prices rose by 9.3%, while in the EU, they only increased by 6.7%.

It is worth noting that in 2017, the picture was the reverse, with prices in Russia rising more slowly than in the EU. Last year, food prices in Russia grew by 0.7%, while in the EU they increased by 2.6%.

Inflation Rate Growing Because of Atypically Cold Weather

In Russia, cold weather in spring and summer can cause the decrease of harvest, which may lead to the growth of consumer prices at the end of this year and even in the first half of 2018, according to new study by the Central Bank, published on July 12.

According to the Central Bank, in June inflation rate was 4.4% in annual terms (before that the inflation rate was expected to be 4%). The growth of inflation in the first summer month was affected by prices for fruits and vegetables, which increased by 8.3% compared to May and by 27.6% from the beginning of 2017. From April to June, price for potatoes went up by 91.9%, and price for staple vegetables except for cucumbers and tomatoes rose by 67.2%, according to the data of the Ministry of Economic Development.

Earlier it was said, that the rise in prices for fruits and vegetables was attributed to the delays of the early harvest because of atypically cold weather in spring and summer. According to meteorologists, May was one of the coldest in the history of the country. However, the Central Bank believes that the spring-summer inflation is temporary.

Beside the cold weather, the inflation rate was also affected by the weakening of the ruble, experts say.

The official authorities expect a slowdown in the growth of consumer prices, including fruits and vegetables. Maxim Oreshkin, head of the Ministry of Economic Development, predicts a decline in prices for vegetables in July-August, after the arrival of a new crop on the market. According to the minister, inflation in 2017 will be 3.8%.


Product assortment and supply of imported fruits and vegetables are reducing in Russia

Because of the instability of exchange markets and ruble devaluation, suppliers are forced to review the assortment every day and reduce supplies of vegetables and fruits from other countries.

Last week the assortment of fruits and vegetables decreased by 20% on average. Suppliers are ready to stop importing a number of niche vegetables such as cherry tomatoes, zucchini, radishes and some kinds of cabbage.

Situation with fruits is a little better. Citrus, bananas, apples and exotic fruits remain the main fruit imports, as on the eve of New Year holidays, this product is in high demand. However, the geography of deliveries changed. Now Russian importers mainly supply relatively cheap citrus from Turkey, while a month ago the main supplier of citrus was Morocco.

Russians may spend up to 40% of the expenses on food

Russians are currently spending about 36 percent of all the expenses on food, but many specialists forecast that this number will grow up to 40 percent. The Russians have started saving and changing their shopping preferences to discount and convenience stores.

According to the study “Russian Food Retail: Current Situation and Prospects”, conducted by VTB Capital, the number 40 percent is significantly higher than the highest figure in European countries. For example, in Germany, the UK and Italy it is about 12-13 percent, in Poland and Turkey it is about 23 percent.

According to the same study, imported food products amount to about 20 percent. As for the fruits the number is about 40 percent, for vegetables it is less – 25 percent.

“One in four consumers now shops at discount and convenience stores,” Ilona Lepp, director of work with retail chains of Nielsen Eastern Europe.

At the same time, the increase in revenue of Dixy retail network (mostly convenience stores) is 29.5 percent in October. During the first 10 months of the year, the increase in revenue was 25.8 percent. The similar situation is with the Russian retail network Magnit – the increase in revenues is a 36.14 percent increase in October, and 30.66 percent increase for the first 10 months of the year. Retail representatives said that they did not noticed consumption decrease.

In July, food inflation in Russia was recorded at 11.4 percent, according to Russia’s Federal State Statistics Service and confirmed by Infoline-Analytics.

Since January consumer prices in Russia have grown 5 times more compared to Europe

For the first half of this year, consumer prices in Russia have grown by 4.5%. On the average, in the EU consumer prices have increased by 0.9% for the same period.

In the U.S., Canada and Turkey, consumer prices have grown by 2%, in the Republic of Korea by 0.7%, and in Norway the deflation rate was 0.4%. The only country, where the inflation rate was higher than in Russia is Belarus, the inflation rate there  is 12% for the period.

According to the Federal State Statistics Service of Russian Federation, the inflation rate of the food segment was one of the highest of all the other sectors in Russia: food prices rose by 5.9% in Russia, in the EU – by 1.6%.

And although price growth for vegetables decreased more than twice, it was still quite high – 8%.

Prices for fruits in Russia fell by 2% in August, in the EU decline in prices for the same period was 3.5%.


Russian Retail Sales Slow To 18-Month Low As Inflation Bites

Russian retail sales grew in July at the weakest pace in 18 months after faster inflation curbed consumer purchasing power, threatening to undercut a mainstay of the country’s economic growth this year.

Receipts at merchants rose 5.1 percent from a year earlier, slowing from June’s 6.9 percent to the weakest pace since January 2011, the Federal Statistics Service in Moscow said in an e-mailed statement today. That missed all 15 estimates in a Bloomberg survey, which forecast 6.2 percent growth.

Russian real wages grew 10.2 percent in July from a year earlier, the service said. That matched the downwardly revised figure for a month earlier and missed economist forecast for 11.2 percent growth. Retail sales from a month earlier advanced 1.6 percent, also missing the median estimate of 2.6 percent.

“The softening in retail sales was to a large extent concentrated in food sales, likely a consequence of rising food inflation,” Vladimir Kolychev, head of research at Societe Generale SA’s OAO Rosbank (ROSB) unit in Moscow, said by e-mail. The expansion in non-food categories was “still robust” at 8.6 percent, he said.

Unemployment remained at 5.4 percent for a third month, the lowest level since at least 1999. Economists had forecast an increase to 5.5 percent, according to the median of 11 estimates in a Bloomberg survey.

“The steady unemployment rate is the only bright spot in the data, generally suggesting that domestic demand is clearly losing steam,” Dmitry Polevoy, chief economist at ING Groep NV in Moscow, said in a note. “With food inflation clearly accelerating, real wage growth easing and retail lending also losing steam, both food and non-food retail sales are set to weaken further in the second half.”


Price growth of fruits and vegetables in Russia: the prices have never grown so fast

According to the Federal State Statistics Service, only during 1st and 2nd of July, the inflation rate grew up by 0.5%: the residential rate fee went up by 6.2%, electricity fee – by 4.7%, water and heating fees – by 2.4% and 3.2% respectively. Surface transportation fee went up by 4%. Vodka prices grew by 1.7%, chicken and sugar prices – by 0.7% and 0.5% respectively, according to the report of with reference to newspaper Vedomosti.

But in June the inflation rate began to rise faster. As the Federal State Statistics Service reported, in June 2012 the price increase rate was 0.9% compared to 0.2% in June 2011. The reason of high rate of the inflation in June was the price growth of fruits and vegetables, as Oleg Zasov, director of the Department of Economic Development, explains. In general, food prices grew by 1.6% in June, but if fruit and vegetables were not taken into consideration, the food inflation was only 0.3%, according to the Federal State Statistics Service.

Prices for vegetables and fruits grew by 13.4% compared to May prices and they went up by 28.8% since the beginning of the year: in June the onion price grew by 39.6%, cabbage price – by 28.6%, potato price – by 24.4%, carrot price – by 21.9%, beet price – by 18.3%.  Lemon price grew by 20.0%, and grapes, pear and orange prices – by  6.3-9.8%.

Andrej Belousov, minister of the Department of Economic Development, called the price rise of fruit and vegetables abnormal. The prices for fruit and vegetables have never grown so fast, and one of the reasons is that the prices for the last year harvest were quite low, meanwhile the stock came to an end in May, and the prices began to rise.

Another reason of the price growth is the drought in Russia’s south regions in May: the harvest of vegetables, especially cabbage, was less than it had been expected before, as Dmitry Rylko, CEO of the Institute of Agricultural Market Studies, told, but he also said that the situation is going to return to its usual state in the nearest future. Dmitry Rylko and Andrej Belousov believe that in July price growth of vegetables and fruit is going to slow down, and then, in August and September, prices may decline.

But while there is no domestic harvest, the import rate is quite high, and it went up because of the depreciation of the ruble, as Evgenij Gavrilenkov, Troika Dialog chief economist, said. According to the Federal State Statistics Service, the general inflation rate grew by 3.8% since the beginning of the year.


Russian Food Inflation Rate Unchanged in May

Food-price growth slowed to 14.1% in April from 15.3% in Q1, according to the Federal Statistics Service (Rosstat). Prices probably rose 0.5% in a month after increasing 0.4% in April. Consumer prices rose 4.6% this year through May 23.

Russia’s inflation rate was probably unchanged in May as the impact of last year’s drought on food prices faded. The annual inflation rate remained at 9.6% for a second month. The central bank expects inflation to slow significantly in the second half of 2011 and has a full-year target of between 6% and 7%.


Inflation in Russia depends more on food prices

Economists believe that 2011 inflation in Russia will become even more dependent on food prices. After Rosstat (Russia’s State Statistics Office) studied Russian expenditure patterns, it revised the inflation calculation basis. The share of food in the expenditures structure has risen from 37,97% to 38,5%. The increase is basically due to a dramatic price growth on cereals, fruit and vegetables, which took place at the end of 2010.