Early supply of new crop vegetables slowed down inflation in June

In June 2019, annual inflation slowed by 0.4 p.p. down to 4.7%. Moreover, the inflation rate decreased across all major components. Growth rates of food prices came down to 5.5%, prices for services, to 4.9%, for non-food products, to 3.5%. These are the findings presented in the new issue of the information and analytical commentary ‘Consumer price dynamics: facts, estimates and comments’.

Inflation decrease was mostly driven by changes in fruit and vegetable prices. This year, supplies of new crop vegetables started earlier than last year, mostly due to the warm spring. As a result, vegetable prices dropped this June more than the year before. Cabbage became much cheaper, although it had been going up in price for several consecutive months. Other vegetables also dropped in price in June. Early supplies of new crop vegetables influenced inflation most noticeably in the southern regions of Russia. Thus, in June inflation in the Southern Federal District slowed down by 0.7 p.p., and in the North Caucasian Federal District, by 0.9 p.p.

It is important to stress that early harvest is only a temporary factor slowing down inflation. There were also other factors in June, including the base effect in the fuel market and the ruble strengthening. In the coming months, certain risks for price dynamics can emerge in the grain market: experts are decreasing grain crop forecasts due to weather conditions.

According to the estimates of the Bank of Russia, at the end of 2019 annual inflation will come in at 4.2-4.7%. Going forward, it will hold close to 4%.