"Gasoline gets more expensive. The people get poorer!"
Photo: Dmitry Lebedev
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Industrial Inflation Twice Consumer Rate
Rising production costs have hit a rate that is the highest since 2004 – 28.1 percent annually. One of the reasons for it is the raw materials boom on the world market. It should not affect consumer prices in the short term, but production prices will pull consumer prices up eventually, and producers will fell keener competition with imports. According to Rosstat, the state statistics agency, the producer price index rose 4.9 percent in June for a total of 17 percent since the beginning of the year. That is 28.1 percent higher than in June 2007. Minerals rose in price the fastest at 10.6 percent and 18.3 percent for the half year. The main factor driving the price rise is oil prices.
The consumer price index rose 9.1 percent from January to mid-July of this year. That is about 15 percent annually. One reason that an increase in the producer price index does not automatically lead to an increase in the consumer index is that export goods are high in the producer index. In a certain sense, Russia exports some of its inflation with its natural gas, oil and metals. Petroleum products and coking coal have increased in price by 150 percent in the last year. They are to a significant extent export goods as well.
Excluding the raw materials sector, producer prices do not looks as catastrophic. But manufacturing will be affected sooner or later because of rising costs and face lowered profitability, forcing them to raise prices. It will be easiest for producers to raise prices on goods with little import competition. In the long term, there is a threat of slowing down the growth of industrial production and the economy as a whole.
www.kommersant.com
All the Article in Russian as of July 23, 2008
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