November cost-of-living round-up

One shouldn't put too much faith in Russia's official economic data, which Vladimir Putin has weoponised during the war with Ukraine to both sap his enemy's morale and boost that of his own people. The economic resilience such data show is real, but almost certainly exaggerated. However, Russia's belligerent leader can do nothing to manipulate exchange rates, which are determined by international markets and currently suggest the Russian economy is in a worse state than Putin would have us believe.

The rouble fell 7% against the euro in November (see first table below) and 10% against the US dollar. This is an alarming slide at any time, but doubly so when Russian interest rates stand at their highest-ever rate (21%) and should be giving the currency a lift. Official GDP announcements suggest Russia is one of the fastest growing major economies in the world this year, but the rouble's slump shows markets don't believe them. 

War economies often grow quickly, as resources and people are shifted from peacetime activities to military manufacture and service, but the imbalances such drastic realignment brings usually mean the 'good times' can only go on so long. Russia appears to be hitting the buffers now, with wages and prices soaring even according to official data, which puts annual inflation at 8.5% but which the Stockholm Institute has calculated is probably closer to 16%. The same institute also thinks the economy may be shrinking rather than growing fast.

Given this fog of war, it is hard to predict what will happen to Russia's economy in the near future, but signs strongly suggest that if Donald Trump doesn't in fact end the war in a day, as he has promised to do on taking office on 20th January, and Russia has to go on fighting in Ukraine, the problems could become a crisis, forcing the Russian people to have as little faith in Putin's words as the rest of the world.

Unusually, more currencies gained significantly against the euro in the last month than fell against it, as the tables above show. The single currency was hit by the threat of US tariffs on EU exports and relatively weak economic data in the Eurozone.

Bangladesh rejoined our double-digit-plus inflation club (see next table, which was otherwise unchanged), having only left it the previous month. The new government there is struggling to bring prices and other aspects of the economy under control following the recent revolution.

In other news, BRICS countries have been quick to deny any plans for a single currency for use within the bloc, after Donald Trump threatened 100% tariffs on goods from member states if they should proceed with such a project. “Recent misreporting has led to the incorrect narrative that BRICS is planning to create a new currency,” South Africa’s foreign affairs department said. 

Finally, here is this month's selected currency movements table: