Households’ inflation expectations remain stable in August

Households' inflation expectations for the next 12 months remained virtually unchanged in August, holding at 9.9% vs 9.7% in July. Petrol prices had a weaker effect on expectations than in July. The risks of a rise in inflation expectations may manifest themselves in the months to come. They are associated with the ruble exchange rate and the VAT rise. Respondents’ consumer sentiment is showing a higher propensity to consume.

The share of respondents who noticed strong petrol prices growth in August dropped to 40% (48% in July). However, although petrol prices had remained almost at the same level for the last two months, they emerged as the most popular answer to the question which goods appreciated the most. This suggests that inflation expectations not only remain sensitive to one-off hikes in prices of certain goods but also tend to hold at an elevated level for some time even in the absence of considerable price movements.

According to the poll, respondents started to mention weakening of the ruble and the VAT increase among inflation drivers more often. These factors can lead to increased inflation expectations during the following months.

Having said that, there are signs of a rising propensity to consume. The share of respondents who consider today a good time for large purchases was a little higher in August, while the share of those who prefer saving declined. Respondents most often plan to increase their spending on housing repairs and maintenance and education.