Russian consumers remained under pressure in April, according to Rosstat’s monthly report published on May 24.

Retail sales is the best indicator of consumer confidence and fell again slightly from the previous month, dropping to 1.2% y/y versus 1.6%, a trend seen for the last five consecutive months.

The volume of retail turnover remained decent, with sales totalling RUB2,636bn in April, which is ahead of the RUB2,447bn in the same month a year earlier. However, retail sales are ticking over at a more or less unchanged level, held back by the stagnation in real incomes.

Nominal incomes in Russia were up 6.9% in April, which is ahead of inflation of 5.3% in the same month so there was a small gain in real incomes, which slowed to 1.6% y/y in April versus 2.3% in March.

However, the all-important real disposable incomes – the money left after buying essentials and paying utility bills – fell again by 2.3% so consumers felt poorer than a month earlier. Real disposable incomes have been more or less flat all year after strong gains in the first half of 2018.

The fall in retail sales is mirrored by the low level of consumer confidence measured by the Rosstat monthly consumer survey which is also running at -16 and in stark contrast to the business confidence survey which has improved dramatically in the last four months to -2%.

Services to the population were the only area that showed improvement with growth at 0.6% y/y versus -0.3% in the previous month. The unemployment rate remained unchanged from March at a low of 4.7%.

Housing construction and industry were the two prime growth drivers last month with volumes of the former up by 6.7% y/y (0.6% in March) and industrial production jumping by 4.6% y/y on higher oil and gas output and the calendar factor, reports BCS Global Markets.

“However, aggregated construction data showed zero growth y/y last month – a sign that investment activity in the economy remained weak. The trend was also evident in the data on 1Q19 fixed investment that rose only by 0.5% y/y, the lowest growth rate since 3Q16. Agricultural output showed the same growth rates as in March (1.4% y/y),” BSC Global Markets chief economist Vladimir Tikhomirov said in a note.

The low levels of investment is Russia’s Achilles’ heel. What investment there is, is dominated by the state and is concentrated in a few mega-projects organised by the likes of Gazprom. At the same time foreign direct investment (FDI) is depressed and once the re-investment of profits earned by foreign companies already present in Russia (which counts as FDI) is excluded then FDI is currently negative. As bne IntelliNews has argued elsewhere, Russia’s businesspeople – both domestic private investors and foreign investors – are suffering from a crisis of confidence in the Kremlin and are sitting on their hands.

“April data confirms that a further slide in growth is unlikely after weak 1Q19. However, major acceleration in economic activity is also off the cards in the short term, which means that Russia’s current growth potential will continue to balance around 1% y/y. We might start to see higher growth rates in 2H19 or in 2020, if the government starts the implementation of its delayed national projects, including new investments in infrastructure,” Tikhomirov added.