Business confidence has made a remarkable recovery in recent months after it collapsed to a low of -7.2 points in August last year following the start of the war. But since then as a wall of state military money hit the economy it has been gradually recovering. (chart)

The business confidence index went positive in January this year – a rare occurrence – to start the year at 1.9 and has remained at 4 points for June and July.

The outlook for the rest of the year remains unclear, as while the economy is expected to grow by 2%, analysts are warning the heavy spending by the state could drive up interest rates and the CBR has already been forced to put through a large 350bp hike in August to halt the collapse of the ruble that will weigh on business in the second half of this year.

From a low of -31 points in the second quarter of 2022, just after the war began, consumer confidence has been improving since the end of last year, rising from -23 points in the last quarter of last year to -15 points in the second quarter. (chart)

Consumer confidence remains negative, but it has always been negative in any case. The recent low of -31 in the second quarter of last year was not quite as bad as the -32 points recorded in the second quarter of 2015 during the post-Crimea annexation recession. There was another -30-point low in the second quarter of 2020, before the war when the economy was doing well, as consumer confidence is very seasonal, falling to a low in the second quarter and rising to a high towards the end of the year.

Confidence has been lifted by the ongoing recovery of the Russian economy, which is expected to expand by about 2% this year, and rising real and nominal salaries thanks to the tight labour market.

At the same time, the shops have refilled with foreign-made products as traders find ways around the international sanctions, and life has largely gone back to normal.