Seasonal features of CPI components for food products

main conclusions

• August is characterized by the lowest values ​​of the consumer price index (CPI) for food products, and the seasonality of changes in food prices is mainly determined by fruit and vegetable products. Vegetables are the most volatile component, destabilizing the CPI for food products, and the amplitude of fluctuations in the index is mostly restrained by meat and poultry.

• Differences in the volatility of the CPI for food products across federal districts¹ are mainly due to five factors: the level of income of the population; the level of competition in the markets for goods that account for a significant share of consumer spending; the self-sufficiency of the district in goods that account for a significant share of consumer spending; the elasticity of consumer demand for goods that account for a significant share of spending; and the volume of food reserves of trade organizations.

• The meat industry was the cause of the changes in the seasonality of the CPI for food products that occurred in 2022–2023. The trajectory of CPI dynamics for most categories of food products in 2023 again was close to the shape observed before 2022. The deformation of the trajectory and increased volatility caused by external shocks persist only in the production of meat and poultry.

• The changes in the seasonality of the CPI for food products that occurred in 2022–2023 may persist in 2024. The reaction of meat and poultry producers to external shocks had a significant impact on the deformation of the CPI trajectory for food products in 2022–2023. This year, the dynamics of prices for meat and poultry may continue to exert weak inflationary pressure for some time, which will exhaust itself as the industry adapts.

• Since 2022, the difference between the cost of the food basket² in different federal districts has increased: in the FEFD, food products have become even more expensive compared to the average Russian price level, while in the VFD, they are even cheaper.

• In 2024, there was a tendency for the CPI for food products to stabilize. In January to March of this year, the CPI for food products in most regions remained more volatile relative to the average values ​​in similar periods³, but the tendency for the trajectories to converge is clearly visible.

¹ This research uses abbreviated names of the federal districts: Central (CFD), Northwestern (NWFD), Southern (SFD), Volga (VFD), Ural (UFD), Siberian (SibFD), Far Eastern (FEFD), and North Caucasian (NCFD).
² In the context of the analysis of average prices in absolute terms, the term food basket refers to the cost of all food products, the prices of which are monitored monthly by Rosstat.
³ Hereinafter, average values ​​for 2017–2021 are used as a comparative base.

‘NATURAL’ TRAJECTORY OF THE CPI FOR FOOD PRODUCTS

The CPI for food products⁴ has a pronounced seasonality⁵. Over the analyzed period from 2017 to the first half of 2024, in most cases in August there is not only a slowdown in price growth, but also a reduction in the price of the food basket (CPI less than 100%).

⁴ Hereinafter, the CPI without specifying the product or product group is understood as the CPI for food products.
⁵ Hereinafter, CPI dynamics are calculated in relation to the previous month in order to exclude the base effect from the analysis.

COMPONENTS THAT HAVE THE GREATEST INFLUENCE ON THE DYNAMICS OF THE CPI FOR FOOD PRODUCTS

The CPI is an indicator that measures the ratio of the cost of a fixed set of goods and services in the current period to its cost in the base period (in this study, in the previous month).

If we consider the various components of the CPI for food products, we can note that not all categories of goods have a pronounced seasonality, and in some cases it is practically absent (this applies to confectionery, bread and bakery products, oils and fats, fish and seafood). The seasonality of CPI dynamics is associated with seasonally volatile components, such as vegetables, fruit, milk and dairy products, eggs, meat and poultry.

The CPI for food products is an aggregate index that includes groups of goods, which include: bread and bakery products; pasta and cereals; flour; meat and poultry; edible fish and seafood; milk and dairy products; eggs; butter and fats; fruit and citrus fruit; vegetables; confectionery; jam, marmalade, preserves, honey; salt, sauce, spices, concentrates, etc. Each group has smaller subgroups and individual types of goods that have different specific weights in consumer spending.

The August minimum in the CPI for food products is due to the dynamics of prices for the following components⁶:

• Vegetables — the minimum annual value of the average CPI⁷ for 2017–2023 is observed in August; in addition, average vegetable prices in absolute terms are the lowest every year from August to September;

• Fruit and citrus fruit — the annual minimum of the average CPI for 2017–2023 for this category of goods falls in August, however, in absolute terms, the average price usually reaches its minimum closer to winter;

• Eggs — the minimum annual value of the average CPI for 2017–2023 occurs in May, but prices for this product decline until August, when they reach a minimum in absolute terms.

In total, the goods and product groups listed above account for about 19% of Russian consumers’ food expenditures⁸.

The maximum CPI for food products is expressed less significantly than the minimum, but it can be noted that the maximum CPI values ​​are most often observed from November to January. This is largely due to the seasonal characteristics of the harvesting of fruit and vegetable products and the shortage of vegetable storage facilities.

We can distinguish two categories of food products in the consumer basket: those that stabilize and those that destabilize⁹ the dynamics of the CPI for food products. We are talking about the degree of intra-annual volatility of CPI components¹⁰.

The CPI trajectory is destabilized by such goods as vegetables, fruit and eggs, the most volatile components of the consumer basket. Their volatility is due to the fact that these groups of goods are classified as perishable and are difficult to store. There are many more stabilizing goods in the food basket — meat and poultry, milk and dairy products, bread and bakery products, confectionery, etc. (Fig. 2).

Stabilizing products are generally either suitable for frozen storage, can be processed to extend shelf life, or are non-perishable.

Open-ground vegetables are grown in most parts of the country for a limited period of time, and vegetable storage facilities are needed for their storage. Reducing the volatility of prices for vegetables and fruit requires capital investment in greenhouses and the construction of vegetable storage facilities.

⁶ More detailed information on the dynamics of the CPI and average prices for the specified goods is given in Appendix 1.
⁷ Hereinafter, data for similar months of different years are averaged (for example, January 2017, January 2018, etc.).
⁸ Rosstat data for 2022 on the structure of consumer spending used to calculate the CPI has been recalculated as a percentage of spending on food products; hereinafter, the specific weights are calculated based on the specified Rosstat data.
⁹ Destabilizing goods (if they have a sufficient share in expenditures) determine the shape of the graph reflecting changes in prices for the food basket, as well as minimums and maximums; stabilizing goods smooth out the amplitude of fluctuations due to their lower volatility.
¹⁰ Hereinafter, the variance indicator of monthly CPI values ​​calculated based on annual data is used as a quantitative equivalent of intra-annual CPI volatility.

Figure 2. Meat and poultry are the main goods that smooth out the amplitude of price fluctuations for the conditional food basket

Sources: Rosstat, ACRA

The CPI values ​​for destabilizing goods are characterized by the highest intra-annual volatility (Fig. 3). However, stabilizing goods have a more significant share in consumer spending, so the CPI for food products is much closer to them in terms of intra-annual volatility.

Figure 3. Vegetables have the most significant impact on CPI volatility for food products¹¹

¹¹ In this case, when calculating the average variance in the CPI time series for 2017–2023, significant spikes caused by external factors in 2020 and 2022 were smoothed out by replacing values ​​for a given month in 2020 and 2022 with values ​​for the same months in the previous year.

The CPI for meat and poultry not only has low volatility compared to the CPI for vegetables, but also opposite seasonal dynamics (Fig. 4). This significantly curbs the destabilizing effect of price fluctuations for vegetables.

Figure 4. Meat and poultry CPI: inverse seasonality compared to vegetable CPI¹²

¹² The average CPI value for 2017–2021 and different scales are used to smooth out differences in the amplitude of fluctuations and emphasize the multidirectional movement.

Unlike vegetables and fruit, the prices of which decrease in the summer season, meat and poultry, on the contrary, become more expensive at this time, and a decrease in their prices is observed in winter due to the expansion of meat product production (Fig. 5). Producers explain this by the accelerated weight gain of animals in the autumn-winter period, which leads to an increase in the volume of meat obtained while maintaining the volume of production.

Figure 5. Meat production traditionally reaches its maximum volume in the fourth quarter, thousand tons¹³

¹³ The average volume of livestock and poultry production (live weight, quarterly indicator) by agricultural organizations that are not small businesses for 2017–2023 is used.

The trajectory of the CPI for food products is formed under the influence of the stabilizing and destabilizing components included in it. Although local CPI minimums are caused by the dynamics of prices for eggs and vegetables, the share of these goods in the structure of consumer spending is small (2% and 10%, respectively), so the dynamics of the CPI on the graph look much smoother (Fig. 6).

Figure 6. The dynamics of prices for vegetables and eggs determines the features of the CPI trajectory for food products, while the dynamics of prices for meat and poultry smooth out the amplitude of fluctuations

Sources: Rosstat, ACRA

FACTORS DETERMINING TERRITORIAL DIFFERENCES IN THE CPI FOR FOOD PRODUCTS

Climate and economic conditions in Russia’s federal districts are heterogeneous, as are the dynamics of the CPI. Each district has its own trajectories of the CPI components for food products, and, accordingly, its own balance of stabilizing and destabilizing influences, as well as the degree of volatility. The CPI in the NCFD has the highest intra-annual volatility (CPI variance is 2.22)¹⁴, the lowest is in the FEFD (0.57), while in other federal districts the intra-annual variance is moderate.

ACRA highlights the following general factors that influence the intra-annual volatility of prices for food basket goods:

• Level of income of the population;

• Level of competition in the markets for goods that account for a significant share of consumer spending;

• Self-sufficiency of the district in goods that account for a significant share of consumer spending;

• Elasticity of consumer demand for goods that account for a significant share of spending;

• Volume of food reserves of trade organizations.

The volatility of the CPI for food products is inversely proportional to the level of income of the population

In federal districts with high levels of population income, intra-annual price volatility (all other things being equal) is usually lower than in districts with lower levels of income.

¹⁴ Information for all federal districts is provided in Appendix 2.

Figure 7. The lower the average income of the population, the more volatile the CPI for food products

Sources: Rosstat, ACRA

The inverse relationship between the volatility of the CPI for food products and household income can be explained by the fact that in federal districts with high income levels, manufacturer can initially include a higher price markup to the cost price in the price of the product to maximize profits (this eliminates the need for the manufacturer to frequently revise prices in response to seasonal fluctuations in cost prices, and for the consumer, such a markup will not be sensitive given high incomes). In federal districts with lower incomes, in order to maintain consumer demand, manufacturers revise prices more often and more significantly (deeper seasonal segmentation of the market allows profits to be maximized in a given period, since fluctuations in the price of goods are sensitive for consumers against the background of low incomes).

In the context of this study, we are interested in groups of goods that have a sufficient specific weight and are capable of influencing the volatility of the CPI for food products. Firstly, these are meat and poultry — the main stabilizing group of goods with low variance and the highest specific weight. Secondly, these are vegetables — a destabilizing product with the highest variance and the highest specific weight in consumer spending among destabilizing goods.

Table 1 shows the minimum and maximum CPI values ​​for vegetables, meat and poultry.

Table 1. The lower the average income of the population, the cheaper meat and poultry become in season and more expensive out of season¹⁵

¹⁵ CPI values ​​are averaged over 2017–2023.

The Herfindahl-Hirschman Index (HHI) is an indicator that assesses the level of market concentration.

HHI < 0.01 means a highly competitive market.

0.15 < HHI < 0.25 means a moderately concentrated market.

Federal districts with lower incomes (NCFD, SFD, VFD) are characterized by the lowest minimum CPI values ​​for meat and poultry compared to other districts and higher maximum values; in other words, pricing for meat and poultry largely depends on the level of consumer income. In the vegetable category, this dependence is less pronounced, and pricing is influenced by other features of federal districts.

In addition to household income, the volatility of the CPI for food products is affected by the level of competition in the markets for goods that account for a significant share of consumer spending. The higher the level of market concentration, the more freedom (all other things being equal) the producer has in setting prices. At the same time, a low level of competition in the markets can have a multidirectional effect on the volatility of the CPI for food products.

The only federal district with a low level of competition in the market¹⁶ for locally produced vegetables is the FEFD (Fig. 8). Moreover, the value of the CPI variance for both vegetables and food products in general in this federal district corresponds to the lowest level. In other words, low competition and high production costs in this case led to consistently high prices for vegetables.

¹⁶ The coefficient is calculated based on data from the SPARK system; data on companies’ revenues for 2022 were used to assess market shares.

The highly concentrated meat and poultry market in the NCFD (Fig. 9) amid extremely high volatility of the CPI for meat, poultry and food products may indicate an alternative pricing strategy of producers — segmentation of the market, including seasonal segmentation, through regular revision of sales prices. The high concentration in the market of an already highly volatile product (vegetables), which destabilizes the trajectory of the CPI for food products, leads to a significant decrease in the volatility of the index for the product group and the aggregate index (Fig. 8, where the dynamics of the CPI for food products in the FEFD is the least volatile). High concentration of goods from the stabilizing group (meat and poultry) in the market, on the contrary, lead to growth of CPI volatility for meat and poultry, and subsequently for food products, to extreme values ​​(Fig. 9, where the dynamics of the CPI for food products in the NCFD is the most volatile).

The volatility of the CPI for food products is directly proportionate to self-sufficiency in goods that destabilize inflation dynamics

The higher the provision of a federal district with stabilizing goods (all other things being equal), the flatter the inflation trajectory. On the contrary, the more the district is provided with destabilizing goods, the more clearly seasonal inflationary highs and lows are manifested.

The following indicators were used to assess self-sufficiency: gross volume of open and closed ground vegetable harvest by farms of all categories¹⁷ per capita¹⁸, as well as livestock and poultry production for slaughter in slaughter weight by farms of all categories¹⁹ per capita²⁰.

Federal districts with the most volatile CPI — the SFD, NCFD, and VFD — have the greatest self-sufficiency in open- and closed-ground vegetables. The destabilizing influence of this factor is so significant that it is not offset by the stabilizing effect of the high self-sufficiency of these districts in meat and poultry.

¹⁷Rosstat’s latest available data for 2021 was used.
¹⁸Rosstat’s population data (average for 2022).
¹⁹Rosstat’s latest available data for 2022 was used.
²⁰Rosstat’s population data (average for 2022).

Table 2. The higher the self-sufficiency of a federal district in vegetables, the more volatile the CPI for food products

* Data on self-sufficiency of the federal district is normalized in relation to the maximum value in the column, which is taken as 100% provision with goods of a given group.
Sources: Rosstat, ACRA

If a federal district’s self-sufficiency in vegetables is over 30%, then its self-sufficiency in meat and poultry does not outweigh the destabilizing influence of the first factor. This may be explained by the fact that extremely high vegetable production volumes and a lack of vegetable storage capacities (even taking into account trade between regions) force producers to cut prices more aggressively during the high season. This way they minimize spoilage and increase the competitiveness of their products in comparison with products that are produced by individuals and sold on spontaneous markets. This significantly increases the intra-year volatility of the CPI for food products. In districts where self-sufficiency in vegetables is less than 30%, the self-sufficiency in meat and poultry, can, to a certain degree, contain the destabilizing effect of changes in vegetable prices. Accordingly, the variance of the CPI for food products will be lower in the CFD, NWFD, UFD, SibFD, and the FEFD.

Low self-sufficiency in a particular product is counterbalanced by interregional trade and import supplies. This minimizes the risks of shortages, but leads to higher prices due to transportation and storage costs, and, in case of imports²¹, makes prices more dependent on exchange rates.

In this case, such balancing in the vegetable market through imports or deliveries carried out between regions makes it possible to regulate the volume of goods present on the territory of a federal district at any one time. When supplies are regular, a federal district needs fewer vegetable storage facilities than more vegetable-rich federal districts. Given the decrease in the severity of the problem of spoilage, there is no need to cut prices in the high season.

At the same time, high self-sufficiency in meat leads not only to a decrease in meat prices in a region (due to savings on logistics costs), but stabilizes the trajectory of the CPI as well. The number of links in the chain between producers and consumers is reduced (fewer intermediaries), which decreases the number of variable components in the final price and makes the price less susceptible to fluctuations.

²¹Currently, the share of imports by region and product group is hard to estimate because the Federal Customs Service stopped disclosing reports in 2022. It is also hard to estimate the share and directions of interregional trade due to a lack of publicly available data.

Figure 10. The CPI for food products is less volatile in federal districts that are self-sufficient in vegetables

The volatility of the CPI for food products is inversely proportional to the elasticity of demand for goods that have a significant specific weight in the consumers’ expenses

Generally, the lower the elasticity of demand for a product, the more free the producer/manufacturer is in its pricing policy, since the demand responds weakly to price changes. To maximize profits, producers/manufacturers are inclined to increase the price, since this does not diminish demand. Low elasticity of demand is often characteristic of essential goods, while most food products are included in the list of socially significant essential goods22. Therefore, the pricing of these goods is under the close attention of the government, which curbs uncontrolled price increases by producers/manufacturers. However, an analysis of statistical data has shown that meat and poultry producers, in order to maximize profits, use information about the elasticity of demand in their federal districts, especially where the elasticity is the lowest: the NCFD, VFD, and the SFD. In addition, meat and poultry occupy a high share in consumer spending, so this pricing policy can be judged not only by considering the degree of volatility of the CPI for meat and poultry, but also by the degree of volatility of the CPI for food products.

²² Decree of the Government of the Russian Federation dated July 15, 2010 No. 530 (as amended on December 30, 2020) “On approval of the rules for setting maximum permissible retail prices for certain types of socially significant food products, a list of certain types of socially significant food products, in respect of which maximum permissible retail prices can be set, and a list of certain types of socially significant food products, for the purchase of a certain amount of which an economic entity engaged in trading activities, payment of remuneration is not allowed”.

Figure 11. The volatility of the CPI for food products is higher in federal districts where the demand for meat and poultry is less elastic

The analyzed data shows that vegetable producers, in turn, less often include the elasticity of demand for their products in their pricing policies. This may be explained by the fact that the products are perishable, so it is quite difficult to manage sales volumes of such products over time. Therefore, the volatility of the CPI for vegetables is much more influenced by demand factors other than elasticity (self-sufficiency, the degree of market competition, the capacity of vegetable storage facilities, etc.). Therefore, there is no strong dependence of the volatility of the CPI for food products on the elasticity of demand for vegetables.

Figure 12. The price elasticity of the demand for vegetables has a weak effect on the volatility of CPI for food products

Sources: Rosstat, ACRA

The elasticity of the demand for meat and poultry is very low in certain federal districts where the proportion of these products in consumer spending is high (the highest proportion is in the SFD, VFD, and the NCFD), which inherently contradicts the fundamentals of economic theory²³. It may be explained by the minimum acceptable volume of consumption of these products in these districts, therefore, when prices rise, consumers are more likely to forgo less priority products and prefer to maintain the volume of meat and poultry consumption. In these conditions, producers are more willing to raise prices for meat and poultry more significantly outside the high season, rather than reduce prices following the expansion of production capacity or the reduction of costs. The 2017–2023 average maximum values of CPI for meat and poultry are observed in the NCFD, VFD, and the SFD, where the elasticity of demand for these products is minimal.

²³As a rule, the higher the specific weight of a product in consumer spending, the higher the elasticity of demand for such product.

Table 3. The lower the elasticity of the demand for meat and poultry, the higher the producers’ prices for them 

The volume of meat and poultry production traditionally increases in winter. Against the background of increased supply, producers in federal districts with both higher and lower elasticity of demand reduce prices for their products. In the districts with low elasticity of demand, meat and poultry prices fall more significantly, which contributes to the expansion of demand. High self-sufficiency and low logistics prices allow producers to reduce the selling price following the decline in the costs, but prices are more willing to go up. The gap between the average minimum/maximum values for the group of federal districts with low elasticity of demand and the group with more elastic demand is 0.33/0.84 pps.

To a large extent, the disposable volume of food stocks created by trade organizations allows for smoothing out the seasonal volatility of the CPI for food products. A one-time purchase, at a single purchase price, of a large volume of products to create stocks allows for maintaining stable prices until the entire volume of stocks is sold.

Figure 13. Large stocks of meat and poultry in the FEFD contain the volatility of the CPI for food products

Sources: Rosstat, ACRA

According to data on the per capita stocks of meat and poultry, except by-products²⁴, for federal districts, this factor has the greatest impact on the FEFD. Local trade organizations in the FEFD create fairly high stocks in view of a low self-sufficiency in meat and poultry and a large number of regions with complicated transport accessibility. Significant reserves, on the one hand, increase the overall price level in the district, taking into account logistics and storage costs, but on the other hand, make the CPI less susceptible to seasonal volatility.

²⁴There is no publicly available information about the stocks of vegetables.

variations in the dynamics of the CPI for food products: A one-time response to an external shock, or a PERSISTENT trend?

In 2022, the dynamics of the CPI for food products changed, but currently, it is hard to say whether these changes are persistent or were induced by a one-time impact of external factors.

the curve of the cpi for food products distorted in 2022–2023

In 2022, the minimum value of the CPI for food products shifted from August to July, and in 2023 — even closer to the beginning of the year, to May (Fig. 1). The 2022 shift is explained by an external shock.

In March 2022, on the backdrop of sanctions and the plunge of the ruble exchange rate, producers’ price expectations reached a historic high (since 2000). In the period from March 4 to May 27, 2022, the price of the food basket²⁴ increased by 11%. Producers revised prices taking into account both actual increased costs and projected ones: a potential further increase in the exchange rate, complication of foreign trade, and the rise in the cost of logistics (Fig. 14; a sharp rise in the CPI in March 2022 and a slowdown by May when the price reached its maximum). In June, on the back of declining price expectations and the strengthening of the ruble in the Q2 2022, the CPI, still calming down after a sharp rise, fell to values of less than 100%, which led to a slight reduction in the price of the food basket. In July, natural seasonal factors of cheaper vegetables joined in, so, as a result of the two concurrent effects, the minimum value of the CPI was observed in July, unlike in previous years. In August, the price continued to decline, but at a more restrained pace due to the waning of the first effect.

²⁴The sum of the prices for all food products monitored weekly by Rosstat.

Thus, the shift of the minimum value from August to July in 2022 can be considered short-term. The increase in the price spread in 2022, against the background of the CPI growth in March, was more noticeable for those groups of products whose prices had not changed so much before.

Table 4. The CPI for vegetables was the least susceptible to the external shock in March 2022

Sources: Rosstat, ACRA

Asfollows from Table 4, the maximumprice changes in 2022 occurred for milk and dairy products and bread and bakeryproducts, the minimum occurred for vegetables. At the same time, for almost allproduct groups, the CPI variance, which increased in 2022 on high CPI values inMarch and April, returned to its natural level in 2023 as the CPI trajectorystabilized against the background of industry adaptation to new conditions andthe absence of new drastic changes in market conditions. In addition, the curveof the annual CPI for these product groups, after some deformation in 2022,shifted closer to the 2017–2021 average trend in 2023. 

Figure 15a. Thedynamics of the CPI for vegetables returned in 2023 to their 2017–2021 averagevalues

Sources: Rosstat, ACRA

Figure 15b. Thedynamics of the CPI for milk and dairy products returned in 2023 to its2017–2021 average values

Sources: Rosstat, ACRA

Figure 15c. Thedynamics of the CPI for bread and bakery products returned in 2023 to their2017–2021 average values 

Sincethe price dynamics for the abovementioned groups of goods returned to their‘natural’ trajectory, the change in prices for them could not affect thedeformation of the trajectory of the CPI for food products in 2023. Thevariance of the CPI for meat and poultry in 2023, on the contrary, continued togrow, which confirms that changes in pricing for meat and poultry could cause a shift in the minimum valuesof the CPI for food products in 2023. Moreover,these changes may be sustainable,which means that the new shape of the curve will persist in the future.

Sources: Rosstat, ACRA

Incontrast to the CPI for food products, in the dynamics of prices for meat andpoultry, despite the average low volatility, in the period from 2021 to 2023there were CPI peaks comparable to March 2022. The first surge in the CPI formeat and poultry was recorded in March 2021, and another in August 2023. Thepeak in the CPI for meat and poultry in March 2021 had only a limited impact onthis group of products and was not reflected in the CPI for food products (Fig. 1). The peak in March 2022 had ageneral economic origin and affected almost all food categories. The peak in theCPI for meat and poultry in August 2023 changed the trajectory of the CPI forfood products. The increase in meat and poultry prices compensated for thenatural seasonal minimum for fruit and vegetables, so that the CPI for foodproducts fell to its minimum not in August, as usual, but in May, when thebalance of pro-inflationary and disinflationary factors had not yet shiftedtowards pro-inflationary ones.

Figure 17. Sharpincrease in prices for meat and poultry in August 2023 did not allow the CPI forfood products to return to its previous trajectory

Sources: Rosstat, ACRA

The rise of the CPI for meat andpoultry in March 2021 was associated with an unfavorable epizootic situation inthe country, namely, outbreaks of African swine fever, Avian influenza, etc.,and can be considered as an episodic internal factor. In contrast, the peakvalue of the indicator in March 2022 was induced by a general external economicshock.

The sharprise in the CPI for meat and poultry in August last year can also be seen as aresponse to changes in the foreign economic environment. Trade restrictionsintroduced in 2022 revealed the dependence of Russian livestock production onforeign vaccines and other veterinary drugs. The main reason for the surge ofthe CPI in August last year was probably the expected increase in the cost ofmeat and poultry from September 1, 2023 amid the entry into force of new rulesfor the turnover of veterinary drugs in the Russian Federation against thebackground of another round of US dollar appreciation.

Thus,the reaction of meat and poultry producers to external shocks over the past twoyears has made a significant contribution to the deformation of the trajectoryof the CPI for food products during this period. This year, the dynamics ofprices for meat and poultry may continue to have a weak pro-inflationary effectfor some time, which will exhaust itself as the industry adapts to new externaleconomic conditions.

LONG-TERMCONSEQUENCES OF THE SURGE IN THE CPI FOR FOOD PRODUCTS IN MARCH 2022

Despite the fact that the sharpest fluctuations in the CPI for food products were mainly of a short-term nature (the period from March to July 2022), they led to persistent consequences in terms of the absolute price of the food basket.

Figure 18. Since2022, the difference between the food basket prices in different federaldistricts has increased

In 2021, theprice of the standard food basket in the VFD deviated from the national averageby 10% downward and in the FEFD by 12% upward. In 2023, deviations in thesedistricts increased to 15% and 18%, respectively. Thus, the price of foodproducts relative to the national average price of the standard food basketbecame even lower in the VFD and even higher in the FEFD. The maximumintra-year volatility of the CPI was observed in the NCFD, while the minimumwas observed in the FEFD (Appendix 2).

With regardto regions, the most significant increase in the CPI for food products in March2022 was recorded in the Republic of Ingushetia, where the price of the foodbasket increased by 15% compared to the previous month, while the averagegrowth for all Russian regions was 6.6%. In addition to the Republic ofIngushetia, the most noticeable growth was demonstrated by two more regions ofthe North Caucasus Federal District: the Republic of Dagestan and the ChechenRepublic.

Unevengrowth of the CPI in 2022 regrouped the federal districts by the food basketprice (Fig. 18). Until 2022, there weretwo groups: with a higher food basket price (FEFD, NWFD, CFD, and the UFD) andwith a lower food basket price (SFD, VFD, NCFD, and the SibFD). After 2022, theUFD left the first group, and the VFD left the second group, and therefore itis now more appropriate to divide the federal districts into three groups: witha high food basket price (FEFD, NWFD, and the CFD), with a medium food basketprice (SFD, SibFD, NCFD, and the UFD) and a low food basket price (VFD). It isworth noting that the food basket price increase was the lowest in the FEFD andthe UFD and the largest — in the NWFD and the FEFD. The residents of the FEFDstill pay more for food than others, and the population of the VFD pay less forfood. In terms of regional differentiation, as of February this year, themaximum price of the food basket was observed in the Chukotka Autonomous Okrug,Kamchatka Krai, and Magadan Region, while the minimum was in the Republic ofMordovia.

THisYEAR’S TRENDS

InJanuary to March 2024, the CPI for food products in most regions still remainedslightly more volatile relative to the average values in similar periods from2017 to 2021. In the first quarter of this year, signs of a slowdown in foodprices were becoming more and more obvious. In January 2024, the CPI for foodproducts in 17 regions exceeded, bymore than 0.8 pps, the average January values, but in February the number ofsuch regions decreased to five, andin March only one region (theRepublic of Ingushetia) showed such a significant deviation.

Figure 19. In Q12024, the highest accumulated²⁶ deviation of the CPI for food products from average values was observed in theNorth Ossetia and the minimum was observed in the Ivanovo Region

²⁶The sum of absolute monthly deviations inJanuary–March 2024.

Despite the fact that in the firstquarter of this year, the CPI for food products in many regions retained asignificant accumulated deviation from the average values, it is worth notingthat in the regions on the left side of the graph (light green; Fig. 20) we can talk about a steadyconvergence of trajectories.

APPENDIX 1. GOODS THAT DETERMINE THE MINIMUM CPI FOR FOOD PRODUCTS IN AUGUST

* All data in the table is averaged for 2017–2023.
Sources: Rosstat, ACRA

Sources: Rosstat, ACRA