Populist policy to keep inflation elevated over the next months

RUSSIA ECONOMICS - In Brief 07 Oct 2021 by Alexander Kudrin

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According to Rosstat, inflation in September reached 0.60% m-o-m - inflation YTD, and y-o-y reached 5.32% and 7.4%. Inflation in seven days ending October 4 was at 0.26%. Out of it, 0.15%, Rosstat allocated to the first four days of October. In September, prices started to grow across the board, especially in the food segment. Until September, food prices increased less than non-food prices.It looks as though the “helicopter money” thrown one-off to pensioners and some categories of civil servants ahead of Duma elections delivered some results. First of all, if to leave aside various speculation about vote counting, opinion polls suggested that United Russia’s popularity rose before the elections (September 17) as pensioners received the R10K “sign up” bonus each in early September. High inflation is another result.There are around 42.6 mln pensioners in Russia, and the average pension in August was R15840 (less than $220). In January 2021, pensions have been raised by around 4.6%, which was below 2020 inflation. As real pensions declined y-o-y, it wouldn’t be an exaggeration to assume that many pensioners will spend the bulk of the election money on food. Note that out of the 42.6 mln pensioners, 8.6 continue to work. Another 34 mln most likely have no other income. Hence, food prices soared almost across the board in September and will continue to rise in October. A one-off election payment to pensioners implies that the average annual pension effectively increased by 5.3% in September. There will be no such increase from October to December. As prices are unlikely to fall, and inflation is going to stay high, it will mean that the growth of retail sales in real term...