A key contribution to the resumption of economic growth in 2017 was made by household consumption in Russia which grew by 3.4% in real terms after growing by 2.8% in 2016 and falling by 9.4% in 2015, Analytical Center experts write in their new bulletin on the current trend in the Russian economy titled How Retail is Coming Back to Life.
A similar trend was also observed in the main component of household consumption - retail: in 2015-2016 retail sales in comparable prices fell by 10.0% and 4.6% respectively but in 2017 they grew by 1.2%, the experts note.
The analysts believe that the rise in household consumption in Russia, especially in retail sales in 2017 happened even as the real disposable income continued to decline for the fourth year in a row. Household spending grew to some extent as a result of an increase in real wages (+3.5% in 2017). This is very different from 2016 when there was a significant gap between the increase in real wages (+0.8%) and the continued decline in retail sales (-4.6%).
In 2015 the share of household savings doubled from 6.9% to 14.3%, meaning that people switched to a saving mode in the face of future uncertainty. But in 2016 the share of household savings fell to 11.1% and in 2017 it was down to 8.1%, which is below the level seen in the stable 2005-2007 and in 2011-2013 periods. "However in 2011-2014 people were cutting back on the amounts they were saving up against even as total household savings in absolute terms were growing, while in 2016-2017 savings were falling alongside a decline in total household income. In that situation there was an increase in retail loans, the number of mortgages being issued went up as well while the consumer confidence in Russia by late 2017 reached the level seen in mid-2014," the experts write in the bulletin.
As for the sales of consumer goods other than groceries in 2016-2017, these were growing faster compared to food stuffs, the analysts believe. In 2016 retail sales of goods other than groceries were falling 0.8 percentage points slower than sales of groceries and in 2017 both groceries and non-groceries sales returned to growth with non-groceries sales growing faster than groceries sales by 1.4 percentage points.
Among foods stuffs 2017 saw significant growth in retail sales of those items the prices for which fell, these included first and foremost fruits and vegetables, as well as groats, eggs, and pasta. Meanwhile demand for food items the prices for which increased such as mil, potatoes as well as tobacco products, was falling (or at least not growing). The experts note that the trend towards a lower share of clothes in total retail sales that started in 2009 continues. Car sales, which share in total retail sales fell from 6% to 5% in 2015, saw their share go up to 5.5% in 2017, as a result of a significant increase in total sales.
For more see the bulletin How Retail is Coming Back to Life.
For the other bulletins on the current trends in the Russian economy see Publications.