The nation’s largest supermarket chain has come across something it’s never seen.
Billionaire Sergey Galitskiy’s retailer, which operates nearly 13,000 outlets in Russia, said the average purchase has fallen for the first time since it started divulging the figures a decade ago, dropping 1.5 percent in the first half of 2016 from a year before. Retail sales in June decreased for a record 18th month, dropping 5.9 percent from a year before, the Federal Statistics Service in Moscow said on Tuesday.
“It’s not possible for consumption to expand,” said Dmitry Polevoy, chief economist for Russia at ING Groep NV in Moscow. “Wages are growing considerably more moderately than they used to, financing is declining or aren’t growing.”
As Russia pivots from a consumer-driven growth model after the crash in oil prices, the catastrophe is decimating the middle class and millions are sinking into poverty. Stabilizing inflation and not even better consumer confidence are translating into stronger demand. Rather, homes are hunkering down.
Almost a third of Russians now buy less food than before, while 49 percent acknowledge by ignoring doctor prescriptions if the treatment is too expensive they save on medication, recent surveys found. Some two-thirds say costs of goods and services purchased by their families are climbing at double the pace of officially reported inflation if not faster.
As more individuals are feeling the pinch, they are also using durable goods for longer, a trend that’s propagating from cars to electronic equipment, furniture and home appliances, in accordance with the Russian evaluation firm, ACRA. Real disposable incomes will continue to decrease for 2 1/2 more years and hazard stagnating said in a report last month.
The fall of retail sales in June surpassed the 5.4 percent median forecast of economists surveyed by Bloomberg. Real disposable incomes dropped 4.8 percent, while wages adjusted for inflation out of the blue climbed 1.4 percent, according to the data service.
The plight of families is coursing through the marketplace, hurting stocks of retailers like Lenta Ltd. and Magnit. Magnit, based in Krasnodar, southern Russia, is down more than 17 percent in 2016.
Consumer misery has been a crucial feature of the downturn in Russia that stretched into its second year. Unlike the downturn in 2009, when Russia supported its currency and increased pensions, authorities responded to falling petroleum costs this time by cutting spending and letting the ruble.
“In the medium term, fiscal pressures coming from the new authorities growth strategy and the subdued oil price outlook indicate the incomes and consumption growth will be confined, analysts at Morgan Stanley, Maryia Berasneva and ” Alina Slyusarchuk, said in a research note.
What’s been a bigger surprise is having less spillovers into politics, even as a parliamentary election looms in the fall, followed by a presidential vote in 2018. Since the conflict over Ukraine erupted in March 2014 President Vladimir Putin’s approval rating has remained at or above 80 percent. Just 23 percent of Russians say they’re prepared to participate in protests if they may be held in the next month or two, compared with 71 percent who won’t, according to survey.
One clue why is that joblessness has scarcely budged throughout the catastrophe.
Despite the recession, people in general continue to have a continuous stream of income.”
Little help is in sight as the government runs its broadest budget deficit opting for smaller increases in pensions and a freeze of wages for public sector employees.
The authorities won’t as long as there are no risks that are political,” Polevoy said trouble. “And a year and a half of adjustments by the population to the trying scenario demonstrates there are not any effects for the government.”