After exploding this year, Russia’s producer price index of inflation (PPI) peaked in May but still remains at record highs.
Consumer price inflation (CPI) has been a concern for the Central Bank of Russia (CBR), which has hiked rates four times in a row this year – March (25bp), April (50bp) and June (50bp) – and was running at 7% in July.
However, from only 3.6% at the end of last year, PPI has exploded, rising to 35.3% in May, its highest level since records began. The price rises are largely driven by the disruption caused to supply chains by the coronavirus (COVID-19) pandemic, which are now struggling to catch up as the economy bounces back strongly in the first half of this year.
Rebalancing the economy and repairing the supply chains appears to have started as the PPI rate came down in June to 31.1%, but producers' inflation remains at elevated levels that will eat into both profits and the growth momentum.
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