Ben Aris in Moscow -

Russian's claim they are unconcerned by Moscow's ban on EU and US food. However, consumers were already unhappy.

WIth everything from Polish apples to Parma ham sliding from the menu, pictures of empty shop shelves have been circulating on social media, accompanied by infographics showing which products are due to disappear from larders. According to vox pops, the man on the street claims to be willing to forego Canadian bacon and Gouda cheese for the sake of patriotism.

However, the Russian shopper was already out of sorts, and retail sales were tanking before the ban on Western delicacies was introduced. 

Russian retail sales growth tumbled yet again in July to below 1% year-on-year - the fourth month in a row that consumer spending showed slowing growth. That leaves retail sales growth at its lowest rate in nearly 50 months, according to VTB Capital. 

That's a serious issue for Russia. The consumer has been the only signficant driver of economic growth over the last few years, with construction and investment both on the floor. 

Consumer's spirits have risen slightly since March, when fears of another devaluation of the ruble led to panic buying of apartments and the dollar to protect savings. However, although these fears have receded, that has not translated into a pick up in sales. Russian shoppers remain pessimistic according to Sberbank's monthly Consumer Confidence Tracker. The index shows consumer confidence has remained negative since at least November, with 70% of respondents describing economic conditions as "unstable".

Buying white goods such as washing machines (which hold their value and are easy to sell) has been a classic tactic to preserve wealth for the average Russian for decades, and they were slightly more likely to make a big ticket purchase in July than in the previous month. However, a double digit car sales fall of 23% in July, according to the Association of European Businesses, shows the consumer is still far from confident. The sales of cars and vans made by Russian company GAZ were especially poor, falling by 28% in the first half of this year. 

Meanwhile, at the top end of the market, luxury good sales - Russian being the fifth biggest market in Europe - are expected to contract this year for the first time since 2009, according to Altagamma - an Italian foundation representing the largest luxury companies and brands - according to the Moscow Times. Luxury good sales were worth $5.8bn in 2013, up 5% on a year earlier, but are expected to fall by 4%-6% this year. 

Perhaps the most telling of all is that Russian's propensity to save was up in the last quarter: just under a quarter of Russians (23%) told Sberbank that now is a good time to save, up from 18% at the end of the first quarter. 

Dropping wages, rising prices 

Several factors are weighing on consumer sentiment. The most obvious is the volatile situation in Ukraine, but this has done more to provoke a sense of patriotic pride than undercut confidence. 

Much more important has been the inevitable slowdown in wage hikes. Through the crisis, wage growth has stood at around 10% per year; in the last six months, real income growth has slowed to only a few percentage. Consumers spending power has also been curbed by the Central Bank of Russia's efforts introduced last year to clamp down on consumer lending, in a bid to avert an obvious bubble. High inflation - particularly on food, which will only get worse in the wake of the ban on imports - and a weakening ruble have added to the increasingly sour mood amongst shoppers. 

"Component-wise, the [year on year] growth in the food component dipped further into the negative area (-1.2%), while a double-digit drop in car sales weighed heavily on the non-food part. For the rest of the year, we see further weakness in consumption and so do not rely on consumer spending as a major driver of economic recovery near future," says VTB Capital. 

Inflation in particular is becoming an increasing drag on growth. The CBR was hoping to bring headline inflation down to its core level of 4-5% this year, but instead the international political brouhaha and sanctions fight will almost certainly drive inflation up to 8-9%, and so hurt consumers further. The headline consumer price index (CPI) increased by 0.6% month on month (MoM) in June and was up 7.8% year on year, compared with 7.6% a month earlier, according to Rosstat. The price increase was led by the food category at 0.6% MoM.

Finally, the relentless wage hikes seen through the last six years will have to slow further. Companies have continued to increase wages to hold on to their best people, but with sales falling, margins are being squeezed and something will have to give. So far unemployment remains at historical lows, but while nominal wage growth has continued, real wages (adjusted for inflation) have now begun to fall, down 2.9% in July. 

"The medium-term risks are rising," warns Alexei Devyatov, an economist at Uralsib. "We believe that the Russian economy is unlikely to grow any faster than 1.5-2.0% per year in 2015-16."