Inflation

    Consumer price inflation was 0.8% in March 2004 and first-quarter inflation stood at 3.5% against 5.2% in the same period last year. The price of the consumer goods basket rose 10.3% last March year on year.

    Several factors affected price dynamics on the consumer goods market in the first quarter of the year. A high level of production and investment activity and significant growth in consumer spending pushed prices up.

Table

    Consumer price inflation was influenced by price dynamics in cost-creating sectors, which had an immediate impact on enterprises’ costs. Prices rose at rapid rates in the fuel sector and electric-power industry in January-February 2004 and freight transportation tariffs increased at the same time.

    Producer price growth accelerated in the light and food industries in January-February 2004 compared to the same period last year and since the output of these two industries goes directly to the consumer goods market, this growth also caused consumer prices to rise.

    Core inflation ran at 0.7% in March and Q1 inflation rate stood at 2.4%, a slowdown of 0.4 percentage points on the same period of 2003. One of the chief factors of the slowing of prices included in the calculation of the basic consumer price index was the reduction of growth in non-food prices.

    The exchange rate policy pursued by the Bank of Russia continued to play a favourable role in restraining core inflation. The nominal rise of the ruble against the dollar contained growth in prices of imported consumer goods and, consequently, prices of their domestically produced analogues.

    Consumer prices of grain and grain products continued to rise rapidly in the first quarter of the year. Prices of bread and bakery products went up 9.1% in this period against 2.5% in the same period last year and pasta was up 6.6% against 1.7%.

    First-quarter growth in food prices, excluding vegetable and fruit prices, was 3.2%, an increase of 0.4 percentage points on the same period last year.

    Vegetable and fruit prices were up 2.8% in March against 1.5% in February and first-quarter growth in vegetable and fruit prices stood at 10.1% against 22.4% a year earlier.

    Non-food prices inched up 0.4% in March, just as in February, and in January-March 2004 they rose 1.4% against 2.8% in the same period last year. In the first quarter of the year, growth in the consumer prices of fabrics, clothes and underwear, knitwear, shoes and detergents slowed down by 0.7-0.9 percentage points year on year. The most significant slowdown was registered in petrol and tobacco prices (9.0 percentage points and 3.5 percentage points respectively)

    Service prices edged up 0.6% in March, a slowdown of 1 percentage point on the previous month. Such a low rate of growth in the prices of services provided to the public is registered for the first time since economic reforms began in Russia. Since the beginning of the year, service prices have gone up 6.4% against 10.6% in the same period of 2003.

    Rent and communal service prices rose 0.4% in March against 2.8% in February, but in the first quarter of the year they grew more than other service prices (13.1% against 17.7% in 2003). Passenger transport fares rose 1.2% in March, but their three-month growth this year was smaller than last year (2.8% against 6.7%). First-quarter fall in communication service prices amounted to 3.1% against 0.5% growth a year earlier.

    First-quarter growth in the prices charged by cultural organisations and pre-school tuition fees stood at 5.4% and 8.4% respectively against 5.3% and 6.2% in the same period last year.

    Although the industrial producer price index (IPPI) slightly fell in February month on month at 103.4%, the rate of growth in industrial producer prices in the first two months of the year was considerably faster than last year at 7.8% against 1.8%.

    The acceleration of inflation in industry was largely due to rapid price growth in the electric-power industry, fuel sector, ferrous metallurgy sector and chemical industry. Producer prices in the electric-power industry have soared 10.7% since the beginning of the year against 6.6% in January-February 2003. Producer prices in the chemical industry rose 9.8% and ferrous metallurgy sector 8.3%. In the fuel sector, the most significant increase in producer prices in January-February 2004 was registered in the gas industry (67.5% against 3.3% a year earlier). Producer prices in the oil-extracting industry were up 11.3, whereas in the same period a year earlier they were down 7.6%. The oil-refining industry continued to demonstrate a price downturn in February, whereas in the coal industry producer prices inched up a little month on month. As a result, the IPPI in the fuel sector registered 115.5% in January-February 2004 against 96.5% in the same period last year.

    In other key industries producer price growth in January-February 2004 was faster than in the same period of 2003.