Inflation hits five-year high in Russia, sending cost of living & prices for basic goods soaring ahead of parliamentary elections

Russia's annual inflation rate has hit its highest level since 2016, new government statistics show, meaning consumers are paying more at the tills for essential items, with prices of food and other products rapidly increasing.

Data published by the national statistics agency Rosstat on Wednesday puts the overall inflation rate in August at 6.7%, higher than at any point in the last five years. While prices only rose by 0.2% since the previous month, an average basket of goods has increased significantly in the past year.

Food products have become more expensive in Russia by 8.5%, while non-food items rose by 7.9% since August 2020. Everyday items saw among the greatest increases, with the cost of sugar skyrocketing by 38.2% in just one year, sunflower oil by 27.3%, and meat and poultry by 12%. In good news for boozers, the price of alcoholic drinks rose by only 2.2% over that period.

At the same time, prices for building materials have risen by 30% since this time last year, with a worldwide lumber shortage driving up prices for Russian wood. In April, the US National Association of Home Builders said that the price of wood on the American market had soared by 250% as a result of higher house-buying demand during the Covid-19 pandemic.

The growth in prices has outstripped pay rises for many workers, and a poll last month by Moscow's Levada Center, registered as a 'foreign agent' by Russia's Ministry of Justice, found that almost two in five of the country's citizens say they have "barely enough" cash for food. With the country set to head to the polls next week, living costs have become a central issue in the election, with President Vladimir Putin pledging a one-off cash payment to pensioners and some public sector workers.

However, on Wednesday, one of Putin's top advisers, Maxim Oreshkin, told the Moscow Financial Forum that inflation was being driven by factors outside the country's borders, saying increased public expenditure in America is distorting the markets. "I believe Russia has found the optimal balance between the size of stimulus spending and the way it is structured, which has made it possible to get out [of recession] and restore the economy in little more than a year," he argued.

However, according to Oreshkin, "the US, which has been running a budget deficit of 15% of GDP for two years in a row... has most likely gone too far with the size of the stimulus and the consequence is a global wave of inflation." President Joe Biden has signed off on around $1.9 trillion in spending, intended as an injection of cash to restart the economy after the disruption of coronavirus. However, on Wednesday, US Treasury Secretary Janet Yellen warned that the country could end up defaulting on its debts if lawmakers don't pass new rules allowing the government to borrow more money to cover the costs.

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