bne:Chart - Consumer confidence tracker shows mood blackens in Russia

By bne IntelliNews October 8, 2015

Ben Aris in Moscow -

 

​With temperatures plunging more than 30C in a week, as an Indian summer gives rapidly away to snow, maybe it is no wonder the latest installment of Sberbank CIB's Ivanov Consumer Confidence Index shows Russian are feeling increasingly glum about their lives.

The thirteenth issue of the Ivanov index, that tracks spending and the mood of consumers in Russia found a "meaningful drop in the consumer confidence index from -14% in 2Q15 to –24% last quarter, as Ivanovs perceive no real macro improvements, while elevated inflation and stalling nominal wage growth are sapping household spending power and increasing price sensitivity."

Russia's economy appeared to stage a small recovery at the start of summer, but a fresh bout of oil price falls and more currency instability seems to have acted as a bucket of cold water for the average Russian.

"The country wealth index for the next 12 months returned to negative territory, from 5% in 2Q15 to –9% last quarter. Over the past 12 months, the national wealth indicator has plunged from –29% to –44%," Sberbank noted in their survey.

Confidence has been undermined by the wild swings in the currency and the number of Russians who describe the Russian economy as "shaky" is up to 85% in September versus 77% in the previous survey.

"We consider this to be a sobering effect after an artificially strong 2Q15, when Ivanovs were overly optimistic on personal and national welfare," Sberbank said.

The renewed pessimism is evident in "big ticket" purchases where the index tumbled to –34% after tentatively recovering to –29% in the second quarter of this year. Despite persistent record low unemployment which remains in single digits, clearly people are worried about their jobs and are putting off big purchases, especially after the orgy of buying that took place in December as consumers attempted to lock up their cash in tangible assets that would hold their value in a crisis.

 

Buy local, buy cheap

In the meantime, Russian shoppers are trading down to cheaper, locally-produced goods from the more expensive imported items: the share of Russians who now say they are more budget conscious when shopping is up to 69% in the third quarter from 63% in the second.

"For the first time since 3Q14, Ivanovs reduced the number of chains at which they shop from an average 2.9 in 2Q15 to 2.4 in 3Q15, in line with the 2014 average," Sberbank found. "This prompted a pickup in the number of visits per store from 1.07 weekly visits in 2Q15 to 1.29 last quarter. This indicates that customers are gradually returning to normal shopping patterns."

The bottom line is the exchange rate-savvy Russian population remains unsettled by the wild swings in the currency with eight out of ten Russians saying that "renewed ruble depreciation has had a negative impact on their spending, either via higher prices for certain items or via the generally gloomier economic outlook." Consumption is unlikely to pick up until some stability returns to the exchange rate regime.

However, Sberbank concluded the survey on an upbeat note saying that inflation has actually not added much to prices and that their panel's assessment may be overly pessimistic. "We expect a recovery in consumer sentiment once inflation risks prove to have been overstated. We assume that this will happen before the start of Christmas sales, which are critically important for the industry's full-year results."

Ivanov consumer confidence index

 

Jan '13

Nov '13

1Q14

2Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

Overall index score

-3%

-13%

-11%

-8%

-6%

-7%

-24%

-22%

-14%

-24%

Personal wealth, last 12m

-5%

-9%

-8%

-6%

-5%

-6%

-22%

-29%

-25%

-30%

Personal wealth, next 12m

16%

8%

10%

9%

10%

9%

-4%

-1%

5%

-1%

Country wealth, last 12m

-10%

-25%

-27%

-18%

-16%

-19%

-51%

-36%

-29%

-44%

Country wealth, next 12m

3%

-17%

-13%

-8%

-6%

-7%

-20%

-7%

5%

-9%

Big purchases conditions

-19%

-23%

-17%

-15%

-14%

-12%

-22%

-39%

-29%

-34%

Source: Cint, State Statistics Service, Sberbank Investment Research

 

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