The road down: wholesale prices portend lower inflation in Russia
If consumer prices in Russia showed a clear downward trend only at the end of July and in August, then the situation is different with producer prices. They have been steadily falling since the beginning of the year. On the one hand, this may be good news, as it portends the end of the period of inflation. On the other hand, it could potentially cause a serious recession and financial problems at enterprises. The extent to which these hopes and fears are justified is described in the Izvestia article.
Industrial deflation
Deflation was recorded in Russia in August: consumer prices immediately fell by 0.4%, which prompted the Central Bank to lower its key rate by 1 percentage point at the September meeting. In general, price declines are common for August (although not in recent years), but this time the drop turned out to be much more serious. However, this is still only an episode in the trend of significant price increases. Whether deflation will take hold will be shown in the coming months.
The situation with producer prices is completely different. In the first seven months, they decreased by 3.1% compared to last December. Although an increase of 0.9% followed in July, production prices continued to decline again in August, dropping by another 0.3%, and this happened year—on-year for the first time in a long time. Moreover, prices for goods that are mainly intended for the domestic market have decreased.
This creates quite an interesting dynamic. Parallel imports and imports through third countries have been fairly stable recently. At the same time, China, the largest exporter of goods to Russia, also has deflation in both consumer and wholesale prices. It is worth adding to this the relatively low dollar exchange rate, which favors Russian importers. Accordingly, the question arises: why has the decline in producer prices (along with other factors) not yet led to a long-term decrease in inflation and even to deflationary processes?
Shelf transfer time
According to Anton Tabakh, chief economist at the Expert RA rating agency, the effect on inflation is already proving difficult to assess. Most likely, the ongoing processes in industry will have a delayed effect on store shelves.
Anton Fufachev, senior analyst at Gazprombank's CEP, notes that, given the structure of industrial production in the Russian Federation, a large weight (39%) in the index is given to the extraction and production of petroleum products. Therefore, the effect for the end user is not so noticeable yet.
— The sector is facing both lower commodity prices (oil, coal) and the strengthening of the ruble, which is why it is "dragging" the entire index down. Excluding this sector, the consumer price index in July 2025 was at the level of 6% yoy, only for consumer goods — 8% yoy, the expert states.
Yaroslav Kabakov, Director of Strategy at Finam IC, also believes that we will see the main effects later.
— In Russia, there is a steady decline in producer prices, which may eventually affect the dynamics of consumer prices. This effect usually manifests itself with a lag of several months: first of all, the growth in the cost of mass-market goods slows down, where competition is high and the supply chain is shorter. However, services, tariffs and import components can smooth out the impact, so the overall consumer price index is unlikely to quickly go into negative territory," the source said.
As noted by Egor Zinoviev, an analyst at Cifra Broker, the producer price index can indeed determine the further movement of inflation, but usually this movement is carried out with a delay of 3-6 months.
— This time is spent on the passage of cheaper raw materials through the entire chain of the final product. Companies can maintain the old prices for a while to increase their margins. At the same time, the impact will be moderate and selective, and not across the entire Rosstat basket," the analyst points out.
Without massive bankruptcies
Although lower prices have a beneficial effect on the dynamics of inflation, enterprises themselves can incur significant costs. According to Anton Fufachev, so far we are not talking about losses, but profits are declining, although not radically.
— Company profits in nominal terms have been declining since the beginning of the year, mainly for companies in the extractive sector, while profits in other sectors of the economy have been slowing less significantly. In general, in the Russian Federation, the profits of large and medium-sized companies in non-financial sectors in relation to GDP decreased from 17% of GDP in June 2024 to 14% in June 2025, which is comparable with the average level of 2017-2019, but not with the crisis periods of 2008-2009, 2015, 2020.
According to Yaroslav Kabakov, a prolonged drop in producer prices increases the risks for enterprises.
— Lower margins with continued costs and debt burden can lead to a reduction in output and investment activity, and in some industries, financial difficulties. Companies with high cost and weak competitiveness have the greatest vulnerability, while more efficient manufacturers have a chance to hold on by shifting some of the savings to end users, the expert believes.
Yegor Zinoviev does not believe that this poses any serious financial difficulties for enterprises, but it may affect production cuts, especially for companies with high fixed costs and producers of raw materials, as well as some low-margin businesses.
In turn, Anton Tabakh believes that the dependence is reversed here. It is weak demand and lower production volumes that provoke a drop in producer prices. In this case, companies are already taking measures to reduce costs, as well as limit their price increases.
In general, according to experts, this is another signal indicating the ongoing process of a "soft landing" of the national economy. In the future, much will depend on the level of interest rates (they are currently at an exceptionally high level in real terms), as well as sanctions and geopolitical factors.
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