According to Rosstat, Russian consumer confidence advanced to -6% in 2Q14, from -11% in 4Q13-1Q14, with improvements across the board.
On the sub-index level, the index of the expected economic changes in the short term increased to -6% during last quarter (from -11% in the previous six months), reaching a year high. Also, the index of past economic changes was up to -6% from -13% (a four-year low), the index of expected changes in the level of incomes edged up to -2% (from -6%), the index of past changes to the level of incomes ticked up to -6% (from -7%), the index of favourable timing to make big purchases kept spiked to -16% (from -20%), hitting the strongest level since 3Q08.
The latest Rosstat survey showed an improvement in consumer confidence in May (while it is reported as 2Q14, it stands for May only), which coincides with the outcome of the poll conducted by the independent Levada Centre. Nevertheless, being on the conservative side we would treat it with caution, seeing it mostly as geopolitical optimism rather than forward-looking indicators of a tangible upswing in household purchases. The upsurge in the president’s approval ratings following the recent geopolitical events might be another illustration of this phenomenon.
Hence, we would for the moment refrain from treating this as a turning point for consumption since the fundamentals remain challenging with sluggish income and retail lending growth. In contrast to this uptick in sentiment, the recent car sales data for June (a 17% YoY drop) paints a dark picture for discretionary consumer spending.
Daria Isakova, Vladimir Kolychev
VTB Capital analyst
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