Higher food prices dampen festive spirits across Russia

This holiday season, many Russians are tightening their belts.

Stubborn inflation has driven up prices of staples such as butter, potatoes and chicken in recent months, hitting Russia’s poorest and causing some to cut back this festive season.

Reuters spoke to Russians in Moscow, St. Petersburg, Yekaterinburg in the Urals and Omsk in Siberia to understand how people are managing their finances.

“Prices have noticeably increased,” said Natalia Moreva, 58, listing flour, bread, chocolates, fruit, vegetables and meat as all having gone up in price.

“Incomes are sufficient, but when you go to the shop you used to be able to buy more,” said Moreva, who works for the Omsk regional government.

“The holiday is turning out to be a modest one.” Russians traditionally increase their spending in the final few weeks of each year, gearing up for New Year celebrations and nationwide holidays in the first weeks of January. This year, they have had to spend a lot more.

“Way more expensive, it is heavy on the pocket. In past New Years, expenses more or less met the budget. Now, the costs are much higher, maybe three or four times more than before,” said Dinara, a student from Yekaterinburg, Russia’s fourth-largest city. Real wages have risen across Russia, largely due to rising salaries in the defence and technology sectors. But for many, wages have not kept pace with inflation, which is running at more than 9%, despite the central bank maintaining interest rates at 21%, their highest in more than 20 years.

Vyacheslav, 73, a pensioner in Omsk, said he was noticing prices rising from one day to the next.

“It is, of course, not very nice or convenient for people at the moment. We understand that the country is in a difficult situation at the moment, but nevertheless I would like for grocery prices not to grow so quickly.

The price of his favourite cheese has risen by 15% to 20% since September, he said, to around 850 roubles.

Inflation could end the year at as high as 9.8%, Andrei Gangan, director of the central bank’s monetary policy department, told Interfax on Tuesday, and will peak in April 2025 before starting to come down. The central bank defied expectations for a rate hike last week and opted to keep the current cost of borrowing, but soaring borrowing costs are cooling demand in Russia’s real estate market, with mortgage rates of up to 30% putting off potential buyers and fuelling a rental market boom.

“Communal services are getting more expensive, (so are) taxes, and it is very noticeable,” said Moscow student Veronica Arefieva. “When you go to the shop, a loaf of bread that once cost 20 roubles, now costs 50 roubles.” Another Moscow student, Sergei Shoreshorin, said the price of chocolates was “scary”. Even the cost of fir trees was high, buyers in St. Petersburg agreed.

“There are people who need a tree who don’t even ask the price, they just buy one,” said Ramiz, who was selling trees in the city. “And there are people who, even when we offer a discount, say they can’t afford it.

“I wish everyone season’s greetings, all the best and that next year everyone will be able to afford it!”

Meanwhile, core inflation in Japan’s capital accelerated in December while services inflation held steady, data showed on Friday, keeping alive market expectations for a near-term interest rate hike.

Factory output, however, fell in November for the first time in three months, suggesting that softening overseas demand was taking a toll on the export-reliant economy. The data will be among factors the Bank of Japan (BOJ) will scrutinise at its next policy meeting on Jan. 23-24, when some analysts expect it to hike short-term interest rates.

The Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, rose 2.4% in December from a year earlier, compared with a median market forecast for a 2.5% gain. It followed a 2.2% year-on-year rise in November.

Another index that strips away both fresh food and fuel costs, which is closely watched by the BOJ as a better gauge of demand-driven inflation, rose 1.8% in December from a year earlier after increasing 1.9% in November, the data showed.

Service-sector prices rose 1.0% in December after a 0.9% gain in November, underscoring the BOJ’s view that sustained wage gains are prodding firms to charge more for services.

“There’s a chance higher wages will be passed onto services prices, which is positive for the BOJ in normalising policy,” said Masato Koike, senior economist at Sompo Institute Plus.

The Tokyo inflation data, considered a leading indicator of nationwide trends, is closely watched by policymakers for clues on how much progress Japan is making towards durably meeting the BOJ’s 2% inflation target — a prerequisite for more rate hikes.

Agencies