The school shopping bump that lifted the Watcom Shopping index at the end of summer has worn off and the index has fallen back heavily in the last weeks of October.

Russia’s economy has been recovering this year, as have incomes and retail turnover, but the good news doesn't seem to have trickled down to the high street level yet where consumers are still counting their pennies and buying only what they have to.

The Watcom index is the most immediate and direct measure of retail activity in Russia as it measures the number of shoppers and their spend in real time using 3D camera technology placed in Moscow’s leading malls.

The index is having its worst year since its inception in 2014, just before the “silent crisis” years of 2015-2016. The index showed its worst quarter for sales since 2014, with its worst result in May ever of 468.8.

Things picked up at the end of the summer a little as families got ready for the new school year. The index jumped to nearly 500 as families stocked up on pens and rulers, breaking the long run of misery earlier in this year.

But the index almost immediately slumped back to multi-year lows in September and was back at 491.34 in October.

On the whole the Moscow Shopping Index fluctuates around 8-10% lower than in 2016. In week 44 the shopping Index was down 7.69% compared to 2016, according to Watcom’s owner Roman Skorokhodov.

“It is quite understandable as disposable income is shrinking, inflation is rising, and consumer activity is decreasing,” Skorokhodov said.

The exception is in the kids category where sales are growing robustly, according to Watcom, with y/y sales in the 39^th week up by just over half (54%).

The general Director of Alaska Originale confirmed the trend, saying his store had seen an increase in kids goods sales by 40% in that week. The driver of sales was lower prices as Russian manufacturers of goods have entered the market, pushing out goods previously sourced in China that had led to much lower prices for the bargain-hungry consumer. In the kids segment y/y sales grew by 67% in kids wear and in 58% in footwear in the 39^th week, according to RBC data.

However, consumer sales are expected to rise as the year wears on as the improving  macroeconomic backdrop lifts sentiment and puts more money into people’s pockets.

The gap between nominal wages and real wages is narrowing thanks to falling inflation, currently at a record 2.8% low. Nominal wage rises have slowed as a function of falling inflation, and real wage increases are slowing, but are consistently rising. Nominal wages were up 5.8% in October with real wages up 2.6%.

However, the story is less good with the all-important real disposable income, the money Russians have left after paying for food and utilities. The real disposable income has been contracting for the better half of two years, but went positive in May for the first time in two years (excluding a spike in January caused by a one-off pension bonus payment). Still the increase was only 0.1% and since then the increase has turned negative again at -1% in July and -1.2% in August.

Unable to pay for little luxuries, Russian consumers have started to make use of consumer credits again, with the level of borrowing growing mildly since the start of this year. But caution about buying on the never never means that credit is not going to be a source of funding to drive a retail recovery, but is supporting the recovery of some big ticket items: Russian car sales were up over 17% in October – the eighth straight month of growth – but here too Russians have abandoned plans to buy a foreign mark and the iconic made-in-Russia newer Lada brands are currently the best selling models.