I want to spend and save at the same time – Newspaper Kommersant No. 238 (7439) of 12/22/2022

Consumer expectations of Russians in the fourth quarter of 2022 decreased against the backdrop of deteriorating confidence in the economically active (especially the younger) generation, Rosstat and the Central Bank record. This happened against the backdrop of stabilization of inflationary expectations and a local surge in assessments of the current time as good for both making large purchases and savings. However, so far, despite the negative real rates on deposits, the population is doing better with the latter, while consumption is declining. A surge in household spending (as well as inflation expectations) during the New Year holidays will be facilitated by the current exchange rate shock.

Latest research on consumer and inflationary sentiment and household expectations Rosstat and the Bank of Russia (.pdf), which were made from the first ten days of November to the beginning of December, and updating the statistics of household spending on Sberbank cards allows us to record the next shifts in the economic behavior of citizens by the end of 2022. In the fourth quarter, compared to the third quarter, consumer confidence began to decline in all age groups except for the oldest, Rosstat records based on surveys in early November. The reason is the worsening of expectations, while the current estimates have even grown (due to estimates of personal well-being). A similar picture is shown by the FOM estimates for the Central Bank, made already in December.

The only thing that has changed is the difference between the desire of citizens to make large purchases and save.

If at the beginning of November the propensity of respondents to buy expensive goods and to save was growing, then, according to the Central Bank, in December the share of respondents who prefer to save free money rather than spend it on buying expensive goods increased to 54.3% (by 1.3 p.p. against November) – the maximum since March 2021.

In preliminary data on the development of the banking sector in November, the Central Bank also noted the revival of unsecured consumer lending (an increase of 1% in November against an increase of 0.3% in October, seasonally adjusted) and an increase in household deposits in October and November (by 0.9% per month on average, excluding seasonality). “With this in mind, in the last two months, the population has been saving in net terms,” Raiffeisenbank analysts conclude. The Central Bank links the population’s increased propensity to save with uncertainty.

At the same time, data on household spending on Sberbank cards shows that even in nominal terms, spending on non-food items declined in annual terms in December — the nominal volume of consumer spending as of December 18 exceeded last year’s level by only 4.1% with inflation at 12.3% on December 19. “This is due, among other things, to a decrease in real incomes of the population, changes in consumer behavior due to the persistence of a high level of uncertainty and a reduction in the usual range of goods,” the CMASF commented.

At the same time, inflation expectations remained stably high in December (12.1%, minus 0.1 percentage points versus November). Inflation expectations in December are “a function of utility tariffs (the most significant increase in the number of responses along with fruits, vegetables, meat and fish). Fluctuations in the ruble exchange rate at that time were hardly the main factor – a survey on the prospects for the exchange rate in a year showed an equalization in the number of optimists and pessimists with an increase in neutral responses, ”notes Dmitry Polevoy from Lokoinvest.

The Central Bank itself states: “In the short term, pro-inflationary risks have grown and prevail over disinflationary ones.” The latter is most likely due to the weakening of the ruble, which may cause a short-term surge in consumption.

In 2023, however, it will continue to decline. “In addition to consumer habits that have changed in a conservative direction, the transformation of the labor market may have a cooling effect, where the difficulties accumulated over 2022 (voluntary withdrawal of a number of foreign companies, a change in the structure of demand for labor) can be realized,” Raiffeisenbank concludes.

Artem Chugunov