Russia’s Watcom shopping index continued to underperform in the first quarter of this year, turning in a score of 468.85, its worst result for May in the three years the index has been running.

The Watcom shopping index ended 2016 on a strong note with footfall in Moscow’s leading shopping malls increasing to just below the 2015 levels. But the index got off to its worst start in three years in the first weeks of 2017, as bne IntelliNews reported last month.

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.

 

 

After the Easter holidays Russian retail always goes into a slowdown as everyone leaves for their country homes during the good weather. But this year already looks like it will be the slowest summer for retail in the Russian capital since 2014, when the current crisis wave started, despite the first signs of an end to the recession.

The Watcom index contradicts the trend in the country-wide retail sector where the 14-month decline in retail turnover finally came to an end in April, printing a no change in sales volume month-on-month.

The other income indicators have also be improving. Nominal wages have been rising through out the last two years, but wage rises only started to beat inflation since August last year. Real wage increases are not strong but were up 2.5% in April and the expectation that inflation will continue to fall this year – it was 4.1% in April, just a tick above the Central Bank of Russia (CBR) target of 4% for the year – means real wages will continue rising.

The last of the triumvirate of income numbers is real disposable income (inflation adjusted income after food and utilities are subtracted), which is still in the red and surprised by falling heavily in April, down 7.6% vs the much more modest 2.5% fall a month earlier. Economists are not sure what was behind the steep fall in real disposable income in April but still expect this number to go positive in the second half of the year, at which point consumption should return as a modest driver of growth.

Still, despite this optimism this month’s Watcom shopping index must come as a disappointment for the leading malls and stores. So far this year has been worse for sales in the Russian capital than any year since 2014 and is getting worse.