Russia Consumer Confidence Still Horrible, But Not Getting Worse

The Russian middle class are still losing money and still believe their economic power is in the gutter, but the good news is that they don’t think it is any worse than it was three months ago.

The Sberbank CIB Ivanov Consumer Confidence Indicator showed a 24% decline in consumer confidence in the fourth, the same as it was in the third, but much worse than it was in the second 14% of the 2,300 survey participants said their personal wealth would decline over the last 12 months.

The Russian ruble is still in free-float free-fall, tracking the fortunes of oil that some believe will settle below $30 this year.

Rosstat estimates that inflation declined to 12.9% in December, down 0.4% from November, indicating weak local demand. Inflation was 15% year-over-year in November. If the weak oil environment persists, it could cause another round of forex pass-through, increasing inflation and making Russians not only feel ruble poor these days, but angered by higher costs in local super markets too.

Russians are tuned into this fact. According to Sberbank CIB, 30% of respondents saw their personal wealth contracting over the next 12 months, which is steady from the third quarter, but still at its worst level all year. If these numbers deteriorate further, investors will take that as a sign that the recession isn’t ending in 1Q16.

The big purchases index held at its low of -34%, which was worse than the second quarter but better than the first.

Sberbank CIB said the number was “unsurprising” given the ruble depreciation and deteriorated outlook for discretionary spending. Furthermore, Sberbank noted the exceptionally spending spree of December 2014, when customers rushed to buy durable goods in an effort to protect their ruble savings from anticipated inflation and the new free-floating ruble. Back then, the ruble went from 35 to the dollar to 71 in a matter of four weeks.

Middle class Russians are still downsizing.

The proportion of Russians who have been trading down rose slightly from 69% saying they did so in the third quarter to 70% in the fourth quarter. Sberbank said Russians were becoming avid discount shoppers. The percentage of middle class Russians saving on food staples by using coupons and bulk shopping grew from 50% in the second quarter to 59% in the fourth.