Inflation surge in Sverdlovsk region reaches 11.4% year-on-year.

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Skyrocketing Prices in the Ural Region:

The costs for consumer goods in the Ural region keep soaring. According to recent Rosstat figures, the inflation rate stood at 0.55% in March 2025 — a decrease compared to the previous months. Yet, on an annual basis, inflation accelerated to an alarming 11.4%.

The biggest culprit behind the price surge was services. However, some goods like smartphones observed a price drop in the region, experts noted.

The most substantial price hike was seen in vacation packages for southern Russian regions. This trend, occurring commonly before the summer season, led to a spike in the cost of air and rail tickets. Additionally, rental housing prices skyrocketed due to increased demand following the cancellation of the mortgage subsidy.

Among food items, coffee and cheese saw the most significant price escalations. This is attributed to poor harvests in major producing nations. Cheese prices also climbed due to increased production costs for dairy raw materials and labor wages. The cost of fish products shot up due to reduced catch volumes.

Conversely, egg, orange, pear, grape, and cucumber prices dropped in Sverdlovsk owing to various reasons, including a stronger ruble. This led to reduced prices for some electronics such as TVs, laptops, smartphones, and headphones.

Experts stress that inflation will persist as the economy's demand is surging faster than the production rate.

Our previous report highlighted that, according to experts, a modern economy cannot thrive without borrowing funds. The Central Bank of Russia's current key rate does not facilitate obtaining loans at reasonable terms, as stated by Academician of the Russian Academy of Sciences, State Secretary of the Union State of Russia and Belarus, Sergei Glazyev.

While the data doesn't pinpoint specific drivers of consumer price rises in the Ural region, certain macroeconomic factors may contribute to the price escalation. These include:

Inflation Projections: Russia's inflation forecast for 2025 was revised upwards to 7.6% (from 4.5%) by the Ministry of Economic Development, reflecting price pressures across the economy.
Currency Risks: Declining oil revenues (Urals prices near $50-56/barrel vs. $69.7 budgeted) could strain the budget and depreciate the ruble, increasing the cost of imports for electronics and certain food products.
Fiscal Policy Constraints: A shortfall in oil revenues, below the budget's $60/barrel cut-off, may necessitate drawing from the National Wealth Fund, potentially impacting subsidies or public spending that previously cushioned the cost of essentials.
Global Trade Pressures: The U.S.-China trade war and OPEC+ production increases may affect supply chains and energy costs, translating to higher domestic prices for goods and services.

For services and vacations, economic isolation due to sanctions might stifle tourism infrastructure investment, reducing supply and augmenting costs. High food prices could be the consequence of reduced agricultural subsidies during stricter fiscal conditions, though regional data on consumer price components is scarce.

I'm not sure if the surge in prices in the Ural region is solely due to local factors, as global trade pressures, declining oil revenues, and economic isolation could also play significant roles.
The accelerated inflation rate in Russia, particularly in the Ural region, has led some to question the feasibility of investing in the retail sector, including food-and-drink businesses, given the unpredictable prices.
As travel becomes more expensive due to increased prices for air and rail tickets, the real-estate industry might see a drop in demand from individuals looking to rent vacation properties in southern Russian regions.
Some experts predict that the finance industry could benefit from the increased demand for loans as businesses and individuals seek to offset the effects of these skyrocketing prices, although obtaining loans at reasonable terms may be challenging given the current key rate set by the Central Bank of Russia.
With the prices of food items such as coffee, cheese, and fish significantly escalating, the lifestyle of many individuals in the Ural region could see a shift towards more affordable alternatives, like consuming fewer dairy products or opting for local rather than imported fish.
The surge in prices for services and travel could negatively impact business activities, particularly in the tourism and hospitality sectors, as expenses for vacations and travel arrangements become increasingly prohibitive.
In light of the current economic climate in Russia, with prices for goods and services surging, some investors might choose to allocate their funds towards sectors that are expected to thrive in such conditions, such as real estate, as rental prices for housing continue to climb due to increased demand.