- Prior 0.9%
The Q2 data is unlikely to be feeling any effects from the sanctions but the tit for tat spat between the US, EU and Russia is going to start playing out in the numbers if sanctions start to bite. The first indications we’ll get will be in prices. I know we had a little laugh and a joke about the produce ban but it is big news for those producing countries.
The first thing that will be hit is prices which will fall as producers will be long of stock with nowhere else to sell it. They’ll be facing big losses and will have to reduce prices in an effort to shift it. One thing Europe doesn’t need is further downside price pressures. On the other side of the coin Russia will have to shop elsewhere and will probably have to pay higher for the privilege.
The sanctions are probably small enough still that we’ll not see a big bite on either economy, even though the Germans are getting worried, but there will be a greater effect on smaller nations who have a lot of their eggs in one basket, like Poland.
It’s something we need to watch out for in future inflation and GDP data.
