Deteriorating CPI Trends Might Overturn Recent Shifts in Household Spending

CEIC Russia Data Talk - May 7, 2014 - The weight structure of the Russian Consumer Price Index (CPI) has been evolving over the years. Annual CPI weight data since 2006 reflect the decreasing influence of food in the CPI, from a 42.71% share in 2006 to 36.51% in 2014, and the increasing influence of non-food items, from 33.74% to 37.71% over the same period. The share of services in the CPI weights has also increased, from 23.55% in 2006 to 25.78% in 2014. The changes have been gradual in the past three years but more significant between 2006-2011. This gradual change in the CPI weights reflects the declining share of household expenditures on food and the increasing share of household spending on non-food items and services. This in turn is linked to the increased real income and financial stability of Russian households during the past decade, in spite of the 2008 financial crisis. The CPI weights for meat products (9.25%) and alcoholic beverages (5.21%) are the largest components in the food breakdown. CPI weight for meat products barely grew by 0.65% in 2013 and that for alcoholic beverages jumped 14.58%, making the biggest contribution to the food CPI (7.32%). The weights for clothing and linen (5.27%) and passenger cars (7.55%) are the key components in the non-food breakdown, rising respectively by 4.66% and 2.51% in 2013. The CPI weights for household services (3%) and housing and utilities services (8.96%) are the main components of the services breakdown, each growing by 7.56% and 9.82% in 2013. Inflation according to the CPI was 6.47% in 2013, which was the lowest inflation rate for the past three years, affected by the slowdown in the Russian economy and the shift in household spending, coupled with the stabilization of other key economic variables within the past decade. The CPI for non-food items only grew by 4.46% in 2013, while the CPI for food and services rose by 7.32% and 8.01% respectively. The ruble devaluation since January 2014 spurred by the civil unrest in Ukraine and Russian involvement in the crisis could undermine the low inflation rate. Monthly inflation accelerated to 1.02% in March 2014, the highest since July 2012. The ruble devaluation might push inflation even higher towards the end of the year since it takes time for producers to pass on rising input prices to consumers. It remains to be seen whether upward pressure on inflation will reverse any consumption trends going forward. By Alexander Dembitski - CEIC Analyst Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
7th May 2014 Deteriorating CPI Trends Might Overturn Recent Shifts in Household Spending

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