According to recent statistical reports, the inflation at consumer market in January comprised 2.3 percent, compared to 1.1 in December and 1.7 of January 2007. So we can say that inflation is accelerating again. Average yearly increase of consumer goods prices in now over 13 percent, and that of food stuffs – 17 to 18 percent
Acceleration of world prices that started again in November is obvious now, when wheat, soy and rice are getting increasingly expensive, and is most commonly cited as the reason of general food price growth.
But I believe the correlation of world pricing and our own market is not critical and cannot fully explain why inflation in this sector is speeding up. Import has the biggest share of 34 percent in meat and meat market, but in fact, meat products are growing in price slower than other ones. Global trends, most likely, affect the pricing of bread and cereal in Russia, despite the last year’s plentiful yield and the government’s measure to discourage grain export. Milk and dairy products are the fastest growing in terms of price, but only 15 percent of them are imported into the country.
World tendencies would not affect domestic market if there were not a powerful expansion of payable demand. The reason for price acceleration on food stuffs is that we are now passing a local maximum demand on these products. In the last few years, the incomes of families with low income (up to 250 -300 dollars per person) has grown. In their spending structure, food is one of the most important items. In other word, incomes of majority Russians have increased, but not yet to the point where their demand shifts from food to other products and services. This assumption can be proved by statistics.
An so, today’s inflation is, to some extent, the price the nation has to pay for saying farewell to poverty, for achieving a level of income at which people don’t have to save on food. When we pass this point, demand for food will not increase so drastically, and the prices will slow down their growth.
Sergei Zhuravlev
Photo: Yuriy Mart`yanov/Kommersant
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