Page 24 - bne IntelliNews Country Report: Russia Dec17

But the index almost immediately slumped back to multiyear lows in September and was back at a bottom grinding level of 491.34 in October.
On the whole in Moscow Shopping Index fluctuates around 8-10% lower than 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 the 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 39t h week up by just over half (54%).
The general Director of Alaska Originale confirmed the trend, saying his story 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 has lead 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 39t h week, according to RBC data.
However, consumer sales are expected to rise as the year wears on as the improving macroeconomic backdrop lists 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 deal 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 (counting out a spike in January caused by a one off pension bonus payment). Still the increase was only 0.1% and since then the increase have turned negative again at -1% in July and -1.2% in August.
Unable to pay for little luxuries from having more money from a pay packet, 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 of 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.
24 RUSSIA Country Report December 2017 www.intellinews.com