Consumer confidence in the Russian market reached another high in the first quarter of 2024

According to Rosstat surveys, consumer confidence in the Russian market in the first quarter of 2024 reached another maximum in the entire history of observations. This comes against the backdrop of an equally strong rise in business confidence and lower inflation expectations. Analysts believe that what is happening may be associated both with the stabilization of the ruble exchange rate and with an increase in the potential of the economy.

Rosstat recorded another sharp increase in the consumer sentiment index in the first quarter of 2024 to the highest level since 2013 – in the history of observations. All components of the indicator grew: expectations regarding the short-term prospects of the economy (especially among young people 16–29 years old), assessments of the growth of personal well-being over the year and the prospects for its growth in the foreseeable future, as well as assessments of the favorability of making both large purchases and savings (the latter grew faster, see graph). Earlier, the March reports of the Bank of Russia “What Trends Are Saying” and on the regional economy also noted rapid growth in consumption. “Increasing real incomes and the inertia of pent-up demand continued to support household spending at a high level. At the same time, the population’s propensity to save began to increase, which was manifested in a stable influx of household funds into time deposits,” noted the authors of the report on the regional economy.

Note that another record in consumer sentiment in the first quarter was recorded against the backdrop of an abnormally high level of spending, which was recorded by leading indicators (see Kommersant on February 29 and March 13), and an equally rapid improvement in company sentiment (the maximum since 2012, see . “Kommersant” March 20) and SMEs (see “Monitoring”), as well as a decrease in inflation expectations of the population and enterprises (according to the Bank of Russia). The exception was retail, where such expectations grew.

All this may indicate that expectations and overall inflation are affected by the stabilization of the ruble exchange rate after a prolonged weakening in 2023 – inflation expectations strongly depend on the latter, argues Grigory Zhirnov from the Higher School of Economics. This is against the backdrop of the fact that “the economy remains in excellent shape – rising wages support people’s optimism, which supports demand and business optimism,” increasing demand for services and rising prices in the sector, he believes. “If so, then the main factor that will determine the beginning and speed of monetary policy easing will be the dynamics of the exchange rate. But to be honest, there is no optimism here yet,” he concludes, without excluding, however, the possibility that the whole point is to expand the potential of the economy: therefore, business activity is growing and inflation is slowing down. However, the authors of the Telegram channel “Hard Figures” do not agree with the latter, estimating seasonally adjusted inflation, adjusted to annual measurements of 6.3% in February, at the level of January 2024.

Alexander Isakov from Bloomberg Economics agrees that the picture is not clear enough. “Where is the economy relative to the potential, how are the members of the board of directors (of the Bank of Russia.— “Kommersant”) assess the output gap – the main issues of the future meeting,” he notes. Meanwhile, analysts from the Department of Research and Forecasting of the Central Bank in the current version of the report “What Trends Are Saying” noted: “The personnel shortage, which, according to surveys of industrial enterprises, reached a historical maximum in January 2024, will maintain high competition for personnel even in conditions of correction down hiring plans (opportunity surveys). This may prevent labor productivity growth from aligning with wage growth, slowing down the process of convergence between supply opportunities and the level of consumer demand. Under these conditions, it will be necessary to maintain tight monetary conditions for a long time.”

Artem Chugunov