Russia's business confidence improves, but consumer confidence remains depressed

Russia's business confidence improves, but consumer confidence remains depressed
Russia's business confidence has been at the decent -2% for three months in a row, but consumer confidence is depressed at -17% / bne IntelliNews
By bne IntelliNews March 29, 2019

Russian President Vladimir Putin is right to be concerned about rising discontent amongst ordinary Russians, although his personal ratings are largely unaffected, but business has become a little more confident.

In the last month business confidence amongst Russian companies remained flat, adding another month at -2%  its best level in over a year and the third month in a row at this level.

Manufacturers and businesspeople appear to be more optimistic about 2019 than the population, despite a slow start to commercial activity in January, according to Russia’s manufacturing PMI panellists.

Despite a softer rise in new business and intense inflationary pressures associated with the recent VAT hike to 20%, survey respondents remained upbeat that output levels would improve over the coming 12 months. The degree of confidence amongst the PMI panellists was the second highest since May 2013. At the same time the services PMI hit a three-month high in February.

There was no new survey data on Russia’s consumer confidence, which in the last quarter of 2018 fell to 17% in Rosstat’s quarterly survey – back to the levels seen during the “silent crisis” years of 2015-2016. Having said that the Central Bank of Russia (CBR) reports that the population's inflation expectations have improved notably since the start of the year, which augers well for a slower rise in prices this year than previously feared.

The fall in consumer confidence is reflected in Russia’s low retail turnover. Retail sales growth slowed to 1.6% y/y in January from 2.6% in 2018. This was tied in with nominal wage growth easing to 5.2% y/y in January from 7.3% in December, which was attributable to inflation climbing to 5% from 4.3% over the period. As a result, real wage growth sank to 0.2% from 2.9%.

It is also reflected in the Watcom shopping index in Moscow’s top malls, which was off to a slow start in January. And it is reflected in the population’s high inflation expectations.

Putin tried to address the miasma that has fallen over the population in his state of the nation speech in February where he came with a Santa’s sack of social spending programmes, designed to make a visible impact on regular Russians' lives.

This article is from bne IntelliNews Russia monthly country report. Sign up to receive the report to your inbox each month, covering the slow moving macro- and micro-economic trends, the major political news and a roundup of the main sectors and corporate news. The first month is free and you can unsubscribe at any time.

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