According to Rosstat, Russian consumer confidence remained at -11% in 1Q14, similar to the previous quarter, with some changes across components. The age breakdown revealed that while the young (16-29 years old) demonstrated worsening consumer confidence, there was an upturn among those aged 50+.
On the sub-index level, the index of the expected economic changes in the short term was the key drag, decreasing to -11% during last quarter (from -9% in 4Q13), the lowest value since 2Q09. Also, the index of expected changes in the level of incomes was down to -6% (from -5%), the index of favourable timing to make big purchases kept worsening and edged down to -20% (from -19%), and the index of favourable conditions to make savings worsened a bit to -37% (vs. -36%).
The only item that improved was the index of past changes to the level of incomes, which ticked up to -7% (from -10%). Meanwhile, the index of past economic changes was sticky at -13%, a four-year low.
The index would likely have worsened had the poll been conducted in March (and not in February, as was the case), when geopolitical tensions started to eat into consumer confidence via the so-called ‘uncertainty shock’.
It is worth noting that the index of favourable conditions to make savings is at a multi-year low. That, together with deteriorating conditions for big purchases, suggests that the households savings ratio might have started an upwards trend. This looks logical, given the current tight monetary policy stance and greater reluctance to spend given elevated uncertainty.
Looking ahead, the headline inflation (fuelled by a weaker RUB) and an anticipated rise in the unemployment rate (SA), along with a moderation in wages growth (in both the private and public sectors, as they have to optimise costs) are likely to weigh on consumer confidence during the coming months, even under a scenario of no additional external shocks.