In October-November, the Russian population did not reduce spending

In November-October 2023, household consumption, judging by indirect indicators, was still growing and fueled by inflation expectations. However, this situation will not remain for long – soon private demand will begin to cool along with the rest of the economy.

According to Rosstat, consumer sentiment in the fourth quarter of 2023 (the survey was conducted from November 1 to November 10) remained at the high level of the third quarter (which in turn was similar to the level of the end of pre-Covid 2019). During the quarter, assessments of personal financial status for the year and its expected changes worsened slightly (by one point) (salaries and incomes are declining, see “Kommersant” on November 30), and assessments of the favorable conditions for savings also slightly improved. “Inflation is too high, and the financial position of companies is no longer secure enough to quickly increase wages, even in conditions of a pronounced labor shortage. The situation with the basic real monetary incomes of the population is even worse – probably due to under-indexation of pensions and benefits “for inflation,” noted economists from the Center for Macroeconomic Analysis and Short-Term Forecasting (CMACF) in a December note analyzing macro trends.

Let us recall that according to the Central Bank (FOM population surveys November 30 – December 13), citizens’ inflation expectations at the end of the year increased sharply, especially in the group of respondents without savings. “A high level of inflation expectations is now one of the main pro-inflationary risks, since it can conditionally soften the rigidity of monetary policy in the eyes of the population (making lending at high rates more acceptable and limiting the propensity to save), thereby fueling demand,” Raiffeisenbank analysts believe.

In October, citizens’ consumption grew, but the growth was concentrated in non-food products. “Perhaps we are talking about nothing more than “crisis consumption” in anticipation of an increase in prices and, most importantly, rates and conditions for loans,” the TsMAKP believed. But, judging by Sberindex data (a seasonally adjusted index of real consumer spending on goods and services, obtained on the basis of Sberbank data harmonized with Rosstat data), in November the growth of spending on non-food products slowed down, and on cafes and restaurants – sharply accelerated amid stabilization of purchases of food and services. This slowed growth in overall consumer spending only slightly, from 9.1% in October to 8.7% in November compared with December 2018.

There are no December data from Sberindex yet, but judging by the weekly spending index of citizens of the Romir agency (it is based on data on the spending of 40 thousand people in 15 thousand households in 220 cities with a population of 10 thousand people or more, scanning QR codes of receipts and recording electronic receipts for all purchased goods and services), in the week of December 11–17, expenses for the period increased by 5.1%, and in annual terms by 26%, significantly accelerating in the first two weeks of December (see chart), although weekly inflation rates, according to Rosstat, have stabilized at this time. “This year marks an early start in the preparation of Russians for the New Year holidays, which is due to an increase in spending from week to week,” notes Romir.

Most likely, consumption growth will still be short-lived and, along with the rest of the economy, will begin to cool in the first half of 2024. “We do not expect inflation expectations to consolidate at high levels; their growth now is most likely due to the rise in prices of marker goods above psychological levels (respondents’ assessments of the future are highly dependent on the current picture). Already at the beginning of 2024, in our opinion, we can expect a correction to the levels of the second half of 2023 (11.5–12%),” concludes Raiffeisenbank.

Artem Chugunov