Household inflation expectations drop below 9% in September

For the first time since June 2018, household inflation expectations dropped below 9% in September. This is evidenced by data provided in the current Bank of Russia commentary ‘Inflation Expectations and Consumer Sentiment’. Short-term business price expectations varied diversely, impacted by temporary factors in individual markets. Analysts’ predictions remained virtually unchanged.

Household inflation expectations reached 8.9% in September vs 9.1% in August. This corresponds to the inflation slowdown trend. Despite the decline, inflation expected by households is still higher than in the first half of last year. In September, respondents’ perception of the increase in prices for certain products and services changed only slightly and in a diverse manner. They more frequently mentioned clothing and footwear and children’s goods as becoming more expensive, which, however, could be related to the increased demand for these kinds of goods before the new school year.

Short-term business price expectations varied diversely. According to IHS Markit PMI surveys, manufacturing companies’ price expectations grew while those of service sector companies were near the lowest level since the beginning of this year. According to Bank of Russia surveys, the balance of responses regarding business price expectations for three months ahead continued to decline.

Analysts’ forecast for end-2019 inflation remained virtually unchanged in August at 4.0-4.3%. Analysts’ mid-term inflation expectations remain anchored to the Bank of Russia’s target.