The Analytical Center has published a new Bulletin on the social economic crisis titled Household Consumption Trends in Russia amid Crisis. In the Bulletin experts of the Analytical Center look at the current trends in the global economy and the resulting trends in household consumption and the situation the average Russians find themselves in. The study focuses on the impact of the crisis on the most vulnerable population groups and the decline in discretionary household spending.
The growth in household consumption in Russia in 2005-2014, which to a large extent was brought about by the high oil rent in that period, has created a kind of a consumer cushion before the fall. Purchases of durable goods in Russia in those years outpaced purchases of such goods in most other major countries in the world. People upgraded their durables on a mass scale, especially in major cities. This mass upgrade happened primarily in private cars, computer and communications equipment.
What we are seeing this year is not a collapse of household consumption but rather a contraction to accelerating inflation taking place even as nominal household income remains unchanged. With respect to discretionary consumption (restaurants, etc.), this has resulted in a moderate decline in this type of spending. In other words, affluent people are not willing to change their lifestyle and for the time being they are still managing to afford it.
The first half of 2015 saw consumer markets go back to where they were one to two years ago in terms of demand and with regard to durable goods they went back to the 2012 level. The amount of consumer purchases recorded in 2012-2013 can be viewed as relatively normal and used as the baseline that all subsequent fluctuations can be compared to, including the slowdown we are seeing this year. Compared with that level the automotive sales have been hit the hardest so far. The situation with demand for catering services is also quite challenging.
The food industry is slowly but surely adjusting to the ‘retaliatory sanctions’ The shock from these sanctions was taken advantage of by local suppliers to raise prices; there has been little progress in terms of competition so far and the banned EU imports are being substituted not with locally sourced products but with imports from other countries. Output in the industry as a whole outpaced demand and, naturally, imports as well.
For other issues of our bulletins on the socio-economic crisis in Russia see Publications.