Nominal wages in Russia jumped an unexpected 9% in June, catching analysts and the Central Bank of Russia (CBR) off guard and leading to speculation that income inequality is rising sharply in Russia.
With the CBR focused on the need to bring down inflation if economic growth is to be restarted through increasing investment, the increase in nominal incomes is bad news.
And even if wages are recovering, retail sales and Russia's consumption-lead growth are not. The jump in nominal wages and steady but still high level of inflation means the real wage growth has returned to positive territory in recent months, cheering up Russian shoppers somewhat. The most recent Sberbank Ivanov consumer confidence index showed the mood amongst consumers is improving.
But that is not feeding through to retail sales, which remain in decline, albeit at a much slower rate than last year: consumption collapsed in December 2015 when retail turnover tumbled by a whopping 15.3%, but in June sales were down by a more modest 5.9%. There is little chance that consumption will regain its role as economic motor this year or anytime in the near future.
No one is quiet sure what caused the spike after monthly nominal wage growth has been running at about 3% last autumn before doubling since the start of this year. Indeed, a central plank of the current Plan K reform strategy is to keep wage growth modest to allow the CBR to cut rates faster and so create conditions for more borrowing and investment.
It appears that the private sector is responsible and increasing wages as companies begin to recover from the shock of the collapse of the ruble in 2014, which halved the value of incomes in dollar terms.
State employees who make up about a quarter of the Russian workforce have seen their salaries frozen and indexed at a rate of 4-6%, well below inflation, which has been running at 7.3-7.4% for the last four months.
The jump in nominal income also contradicts the slowly rising levels of poverty: Russia's poverty share of people living below the poverty line has crept up to 13.4% now and the World Bank predicts it will top 14.2% by the end of this year. The number of Russians considered poor already grew by 3.1mn to 19.2mn last year, the most since 2006, reports Bloomberg.
All this suggests that Russia's widely anticipated economic recovery is starting with the middle class working in the private sector.
However, income inequality was already a big problem in Russia. The top 10% of the population own 87% of all household wealth in the country, a higher share than in any other major economic power, Credit Suisse Group AG said in its latest Global Wealth Report.
Wealth distribution is "very uneven" by another measure, with 3% of depositors, or 1% of the population, holding 46% of all personal bank deposits, according to VTB Capital.