Moscow: Not even Russia’s "Valentine’s Day for men” could rouse consumers from a slumber that’s stretching into a third year.
February is usually a time of impulse buying because the actual Valentine’s Day is followed by a holiday for veterans and people serving in the military — which dates to Soviet times and doubles as a celebration for men as a whole. But gloom has descended this time around, keeping consumption down even as broader economic growth gains traction.
The Watcom shopping index for Moscow, which surveyed activity at about 150 malls in the capital, plunged 8 per cent from a year earlier in the days preceding the Feb. 23 holiday known as Defender of the Fatherland Day. The gauge deteriorated further during a period before International Women’s Day on March 8.
Data due on Monday will show that retail sales last month extended a record stretch of declines, once again bucking gains in real wages and disposable incomes, according to economists surveyed by Bloomberg.
"Instead of a pre-holiday splash, there’s a decline,” said Maria Vakatova, partner at Watcom Group, the Moscow retail consultancy that compiles the shopping index. "The share of emotional purchases is falling, which is the main change in consumer behavior.”
The Russian consumer is increasingly going from mainstay to bystander as a post-recession economy takes shape. While stabilising, the unremitting decline in retail sales shows it’s been largely immune to growth in earnings, a precipitous decline in inflation and a rally in the ruble.
The reasons vary. A hole blown in household finances by the crisis will take years to patch up. S&P Global Ratings estimates gross domestic product per capita in 2020 — while growing from this year — will still be almost 30 per cent below its 2013 level.
Buyers also remain sensitive to prices and discounts, according to Watcom. That’s also borne out by Sberbank CIB’s survey of the typical shopper, which found that the share of those trading down to cheaper options rose last quarter to 71 percent from 68 percent in the previous three months.
Retail sales, set for a 26th month of contraction, declined 2 per cent last month from a year earlier after a drop of 2.3 per cent in January, according to the median of 14 estimates in a Bloomberg survey. Wages adjusted for inflation added 2.2 per cent and real disposable incomes grew 0.3 per cent, separate polls showed.
Data for January, when retail sales had their smallest decline since they began shrinking in 2015, were skewed by a one-time payout to pensioners. The Micex Consumer Goods & Services Index has lost 5.3 per cent in 2017, compared with a drop of almost 9 per cent in the broader Micex Index.
The rouble has gained about 7 per cent against the dollar this year, the third-best performer in emerging markets. GDP grew at the start of the year and may expand about 2 per cent in 2017 on an annual basis after shrinking in 2015 and 2016, according to Economy Minister Maxim Oreshkin.
"Recovery in the economy is not uniform,” said Chris Weafer, a partner at Macro Advisory in Moscow. "The consumer and construction sectors will remain in recession for longer, while defense and import-substitution are driving the growth.”