MNI Indicators - Russia Consumer Sentiment Edges Higher in June

12 July 2016

Personal Finances, Buying Conditions Weigh Heavy on Confidence 

Consumer sentiment in Russia rose marginally in June, following the series low seen in May. The MNI Russia Consumer Sentiment Indicator increased 0.5% to 67.6 in June from 67.3 in May.

Sentiment is now 11.5% lower than the same month a year ago and down 2.3% since the start of the year. Completing the data for the second quarter, the results from April, May and June left Q2 sentiment at a series low of 68.8, 1.8% lower than the Q1 outturn of 70.0.

Three of the five components of the headline indicator fell to series lows in June. Current Household Finances declined 4.1% to 60.4, marking the third consecutive loss, while Durable Buying Conditions declined 1.8% to 71.4, exacerbating further the 8% fall seen in May. These movements placed consumers’ perceptions of their current situation at an all-time low.

Expectations for the future, however, fared better in June relative to May. Expected Household Finances rose 9.8% to 71.5, the highest since June 2015. Disinflation since the turn of the year has alleviated some of the pressure on household balance sheets, and the recent cut in the key bank rate will have encouraged consumers that their real income will grow should monetary policy continue to prove effective. The Inflation Expectations Indicator continued its downward trend, falling 0.7% to its lowest level since August 2015.

Expectations of Business Conditions in Five Years rose 4% to 78.6, the highest since August 2015, while Business Conditions in One Year slipped to a series low of 56.2 from 59.9 previously. The contrasting results suggest that while consumers believe long-term prospects for the economy appear relatively bright, obstacles, in the form of newly renewed sanctions for instance, may well hinder economic progress in the short and medium term.

The Real Estate Indicator returned to expansionary territory in June, having receded below the 100-mark in May for the first time since the survey’s inception. The indicator increased 4.7% to 104.3 from 99.7 in May.

Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “Russia consumer confidence remains close to record lows with consumers still reeling from the hit to their real incomes in recent years."

"The June rate cut from the CBR seems to have provided some optimism for the future although expectations still remain at a low level in absolute terms".

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