Consumer spending in Russia

The main articles are:

• Consumption in Russia
• Russian economy

For 2022 in Russia, the consumer economy is concentrated with a significant advantage in retail trade. Retail trade is 3.3 times more than the service sector of the population (38.1 trillion compared to 11.5 trillion), and in the United States it is half as much, that is, the gap/imbalance is 6-7 times.

Retail

Main article: Retail trade in Russia

2024

Rapid growth in consumer spending of the population ensures the growth of the Russian economy

Household consumption is only 52% of Russia's GDP structure versus 68% in the United States, however, the dynamics of consumer spending determines the trend of the Russian economy. All contribution to GDP growth in the first half of 2024 was provided by households, compensating for negative investment dynamics and weak momentum in net exports.

After a record collapse in consumption in 2Q22 (-7.5% QoQ SA), consumer spending is growing continuously from 3Q22 at an average of 1.9% per quarter, over the last 12m the average rate is 1.47%, and over 1P24 - 1.54% and 1.63% in 2Q24, i.e. the growth rate does not weaken.

By historical standards, the intensity of household consumption growth remains at a high level, because in 2017-2019 the average rate was 1.09% per quarter, and in 2011-2013 over 1.45%.

Consumer spending by 12.7% exceeded the maximum of 4q14, by 11.4% exceeded the dock level of 1q20 and by 7.5% exceeded the pre-sanction level of 1q22.

Consumer demand in April by 5% exceeded the record level of 2014 after 10 years of stagnation

By May 2024, consumer demand in Russia was very strong, although the intensity of growth is decreasing.

Retail trade turnover, taking into account inflation in Apr. 24, increased by 8.3% YoY, for Jan-Apr. 24 growth by 9.9% YoY, and the volume of paid services to the population increased by 6.8% and + 6.2% YoY, respectively.

Consumer demand (goods + services) grew by 8% YoY and + 8.8% YoY over 4m24.

All these numbers are not enough, what do they talk about without understanding the context and the "coordinate system" - a lot of it or little, what to compare with?

By the amount of 12 m, retail trade turnover in April 24 exceeded the pre-crisis level by 2.9%, but still 0.8% below the level of Dec.14 (a month before the start of the full-scale and longest crisis since 1998 2015-2016).

However, if we compare Apr. 24 with Apr. 14, over 10 years the increase is only 4.6% and + 5% when comparing the first 4 months.

Already in May 2024, annual retail sales should surpass the historical maximum in comparison with the moving 12th amount, i.e. zero growth over 10 years, Spydell Finance wrote.

With services, everything is much better. The demand for services exceeded the level of Feb. 22 by 10.7% and + 19.7% to the level of Dec. 14 by the amount of 12 m in Apr. 24. In the monthly comparison in Apr. 24, services are 23.3% higher than in Apr. 14 and almost + 25% compared in the first 4 months of the year (4m24 to 4m14).

Consumer demand for goods and services in the amount of 12 m in April 24 exceeded demand in February 22 by 4.6% (the crisis is over with a confident consolidation of the result), and by December 14 the growth was only 5.2% due to the high weight of retail sales.

Therefore, impressive achievements in the growth of consumer demand are only compensation for 10 years of stagnation (+ 5% for 10 years is frankly weak, so there is still potential).

In Apr. 24, consumer demand was 9.7% higher than demand in Apr. 14 and + 10.2% in comparison with the first four months.

In January-April 2014, retail sales form almost 75.7% in the structure of consumer demand, and two years ago - 76.7%.

Revenues allow you to maintain effective demand, but the limitation is the lack of a commensurate supply of goods and services due to sanctions from the United States and its satellites and the internal weakness of the consumer sector, which leads to higher prices.

Consumer demand in Russia in February set a record for the first time since 2014

Retail sales in February 2024 increased by 12.3% over the year, services added 6.4%, and total consumer demand (retail sales + services excluding catering) increased by 10.5%. The effect of the 2023 base affects here, however, the trend for demand growth appeared in December 2022.

Retail sales have been most vulnerable since March 2022 for many reasons: undermining purchasing power due to the devaluation of the ruble (over 70% of the commodity segment outside food - imports), the savings consumption model (largely due to the shock after the outbreak of the conflict in Ukraine and related processes) and narrowing commodity nomenclature due to sanctions and undermining supplies from Europe.

Despite all exogenous and endogenous factors limiting the potential for demand, in February 2024 retail sales were 2.7% higher than in February 22, 9.3% higher than in the last dock month (Feb. 20) and 4.5% higher than in the last month before the Crimean spring (Feb. 14).

In terms of the moving amount for 12 months, retail sales have not yet reached their maximum, but at the moment (comparison of the February level) the current level of retail sales is the maximum in history.

Services were 9.2 per cent above two years ago, 16.9 per cent above Feb.20 and 25.2 per cent above Feb.14. Rosstat notes a parabolic increase in IT services - 88% YoY, fitness centers and sports clubs - 12.1% YoY, courier services - 40.5% YoY, cultural, tourist services and hotels - 10-11% YoY.

Consumer demand in aggregate was 5% higher than Feb. 22, 10.8% higher than Feb. 20 and 9.8% higher than Feb. 14. Yes, it may seem that in 10 years progress is insignificant (less than 1% of growth), but consumer demand tried three times to exceed the level of 2014 (Feb. 20, Feb. 22, 4Q23) and only in February 2024 it was possible, and with a breakthrough.

Source: Spydell Finance

With the elimination of the seasonal effect at the beginning of the year, there is an acceleration of growth in all key commodity groups and types of services. The rigidity of the DCP of the Bank of Russia does not affect demand in any way, everything determines the pace of salaries and budget payments.

2023: Consumer spending rises again

For the first half of 2023, consumer demand in Russia increased by 2.3% YoY, compared to 1P 2021, an increase of 1.2%, compared to 1P 2019, an increase of 5.5%, and over 9 years (1P 2014) symbolic growth by only 0.8%.

In fact, we are talking about a 10-year stagnation of consumer demand and this is taking into account official inflation. For comparison, from 2000 to 2008, consumer demand tripled against the background of growing total incomes of the population.

2022: The volume of paid services to the population amid the conflict in Ukraine remains stable

The service sector against the background of the conflict in Ukraine in 2022 is generally stable - an increase of about zero. For April-November 2022, an increase of 1.4%, which is quite good. 2022 levels are comparable to 2019, 5.4% higher than 2014 and 10% higher than 2008.

Spydell Finance data for November 2022

The stability of the service sector is due to several factors - inflationary emissions were quite limited, with the exception of foreign tourism and air tickets, therefore, with the growth of nominal salaries, the purchasing power of the service sector remained at a high level.

The second factor is the localization of the service sector in Russia throughout almost the entire range.

2020: Decline in consumer spending in Russia by 9% (record decline in 5 years)

The expenses of Russians in 2020 fell at a record high rate over the past 5 years - by 9% compared to 2019. This is evidenced by the data of the audit and consulting network FinExpertiza.

According to experts, the average monthly spending of citizens of the Russian Federation in 2020 amounted to 26,900 rubles. The Russians have moderated their expenses by 1.68 thousand rubles a month, or by 20.2 thousand rubles for the whole year, TASS reports the Russian Information Agency with reference to the FinExpertiza study.

Total consumer spending in Russia at the end of 2020 decreased by about 2.77 trillion rubles. Analysts called the reasons for the reduction a drop in disposable income and quarantine restrictions, which led to a forced decrease in spending on food and leisure outside the home, transport, services, etc.

The largest drop in consumer spending was recorded in the Sverdlovsk region. There they decreased by 13.7%, to 29,700 rubles a month. In Moscow, the figure decreased by 13.2%, to 50,300 rubles. At the same time, two regions recorded an increase in expenses: by 0.3% in Chukotka (up to 31,870 rubles) and by 0.2% in Kalmykia (up to 11,700 rubles).

Residents of the Leningrad Region (by 0.3%, taking into account inflation, to 26.7 thousand rubles), Khakassia (-0.8%, to 20.78 thousand rubles), Altai Republic (-1.2%, to 14.74 thousand rubles) and Chelyabinsk region (-1.3%, to 19.6 thousand rubles).

With rare exceptions, consumer spending was reduced by residents of more prosperous regions, and it remained unchanged in the poor, where people could not afford to spend even less. FinExpertiza President Elena Trubnikova explained that anti-crisis social payments allowed low-income citizens to maintain minimal consumption amid rising prices, which led to a slight increase in costs.^[1]

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