Page 8 - RUSRptApr17

trade turnover declining by a mere 0.4% y/y in March, according to Rosstat, against a consensus expectation for a 1.6% decline in the period. This compares with December 2014 when retail turnover fell off a cliff with a 15.5% contraction that month y/y.
“The dynamic of retail sales improved amid acceleration of real wage growth from 1.0% y/y in February to 1.5% y/y in March,” Gazprombank wrote on April 19, adding however, that this mainly reflects the deceleration of inflation as nominal wage growth slipped by 2bp to 5.8% y/y in March.
Various factors are lining up to support a recovery in retail sales later this year. Inflation has fallen again and is now close to the Central Bank of Russia (CBR) target of 4%; inflation is forecast to be 4.1%-4.2% in April that will probably mean another growth-boosting rate cut by the regulator, earlier than expected.
The low and falling unemployment rate (down from 5.6% to 5.4% in March), could also support consumer confidence , as well as expectations of additional budget payments ahead of 2018 elections.
And retail loans grew by a moderate RUB30bn (0.3%) in February after being adjusted for exchange rate movements. The growth was mainly in state banks (RUB27bn), particularly in VTB group (RUB22bn, 1.1%). Among the specialised retail banks only Tinkoff grew by 2%, while Russian Standard, Home Credit, OTP and Rencreit deleveraged by 0.2%-1.3%.
VTB Capital also wrote on April 19 that “healing household budgets was inevitably going to spill over into more confident consumption patterns”, reminding that the Rosstat consumer confidence index recently returned to Q4/14 levels, while other surveys indicate increasingly enthusiasm for big-ticket purchases.
“We expect annual consumption growth consistent with 2%-3% real wage growth and that flat to slightly positive retail lending after adjusting for inflation will be approximately 2%-3%,” VTB Capital analysts predict, warning that “the turnaround in consumption, however, will be neither overly fast, nor too large”.
Watcom president Roman Skorokhodov said: “The negative trend is stabilizing. The 16th week index results is 11% less compared to 16th week of the last year. But consumers are following the rational model in purchasing behavior and still hunting for “good deals.” Shopping centres, retail chains and supermarket have changed their offer accordingly, analyzing their consumer profile, and this trend will continue for the meantime.”
8 RUSSIA Country Report April 2017 www.intellinews.com