Page 36 - RusRPTJul19

4.5.3 Retail sector dynamics
Russian retail sales growth slowed down to 1.4% y/y (1.7% y/y for 5m 2019) in May from 1.6% y/y in April.
The growth was attributable to food segment, which added 1.7% y/y (vs 1.5% y/y in April) while non-food sales visibly decelerated (from 1.7% y/y to 1% y/y). We note that currently the high base effect (pre-election budget spending in 2018) is distorting the figures. However, the VAT hike effect is also putting pressure on consumer expenditures.
Fundamentally, consumer demand remains weak as there are no plans on wages indexation for public sector employees and the mandatory payments on loans are increasing. These factors will not allow the retail sales to accelerate much higher than 2% y/y.
The lacklustre growth reflects disposable income growth being down - 2.3% y/y in 1Q19 (the last value available). This anaemic demand growth is likely to persist throughout the year, we believe, as long as the 2018 base effects are at play (higher inflation, no extra-public sector wage indexations etc.).
The growth momentum trend in food retail turnover has been stable at +0.2% m/m sa 3mma since YE18, while the growth momentum in non-food retail sales is trying to settle in the black and is now running at +0.06% m/m sa 3mma.
36 RUSSIA Country Report July 2019 www.intellinews.com