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IKEA suspends kitchen sales in Russia

A run on Ikea kitchen furniture and appliances has forced the Swedish company to suspend sales in Russia as it could not meet demand.

The collapse in the rouble, and the imminent threat of rising prices, triggered a rush on durable goods as Russian shoppers tried to spend their savings before the value of the currency fell further.

CNN worked out that one of Ikea’s Billy bookcases retailed for the equivalent of $62 six months ago but is now fetching only $30 because of the rouble’s swoon.

Ikea, which will resume sales next week, is not alone. General Motors and Jaguar Land Rover stopped delivering new vehicles to dealerships in the region yesterday after Audi reacted to the currency crisis by suspending its delivery of new cars.

The Russian collapse will hit the automotive market hard, given that the country was expected to act as a growth engine for the sector. Apple was the first company to raise the prospect of increasing prices earlier in the week.

Russia shoppers have been panic-buying everything from cars to flat pack furniture today after stores warned of price hikes at the weekend following a sharp fall in the value of the rouble.

Several Ikea stores have been forced to close after the company warned its prices will go up from tomorrow, while cars and home appliances have been bought in record numbers.

The rouble has slid 15 per cent in just two days, hitting an all-time low of 80 to the dollar at one point yesterday, prompting fears of a run on Russian banks.

Alyona Korsuntseva, a woman in her 30s, says the current situation reminds her of the 1998 crisis when the value of the rouble plummeted after the government defaulted on sovereign bonds.

She said: 'What's pressuring us is the fact that many people rushed to withdraw money from bank cards and accounts.

'We want to safeguard ourselves so that things wouldn't be as bad they were back then.'

Pictures from the capital Moscow showed people with trollies filled with televisions, toasters, and furniture ahead of stores putting their prices up, while other waited in long lines at checkouts.

But while street shoppers cashed in, some online shoppers were left in the lurch after companies such as Apple suspended sales, saying they could not set prices while the currency was so volatile.
The tech company already raised costs by 20 per cent earlier this year after the poor performance of the rouble made its products cheaper in Russia than elsewhere in Europe.

Financial crisis has been looming in Russia for a while as trade sanctions over Ukraine, combined with falling oil prices, have put pressure on the economy.

Yesterday's meltdown was triggered after the Central Bank put up interest rates from 10.5 per cent to 17 per cent, a move that was meant to shore up the rouble, but instead caused panic.

As international investors moved assets elsewhere it caused the value of the currency to plummet.
That trend continued this morning, and the currency's value has been up and down throughout the rest of the today.

As of 4pm this afternoon, Moscow time, the rouble has settled at around 65 to the dollar, 3 per cent higher than closing yesterday.

The upward swing came on the back of Deputy Finance Minister Alexei Moiseyev saying that the government is going to sell foreign currency 'as much as necessary and as long as necessary' to relieve the pressure on the rouble.

Prime Minister Dmitry Medvedev also hosted a meeting with the heads of Russia's largest exporters and pledged to implement a 'package of measures' to stop the decline of the ruble.

He said the details of the measures to be pursued will be hammered out at the meeting and these will be only 'market steps.'

'This is a very dangerous situation, we are just a few days away from a full-blown run on the banks,' Russia's leading business daily Vedomosti said in an editorial on Wednesday.

'If one does not calm down the currency market right now, the banking system will need robust emergency care.'

As Russia's Economic Development Minister Alexei Ulyukayev said the hike in interest rates came too late, forecaster predicted the country's economy would shrink by up to 5 per cent next year.
The dire predictions come as Barack Obama prepares to sign a new set of legislation authorizing more economic sanctions on Russia.

Source : Chris Pleasance - Daily Mail

22 December 2014

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