Russians decide to make purchases – Kommersant FM

The Central Bank recorded a record in consumer sentiment: 30% of Russians would prefer to make a large purchase instead of saving money for the future. The previous record was set in May 2014, but has now been broken. The population has begun to better assess their current financial situation, the Central Bank said in a report on Russians’ inflation expectations. They remain elevated, but the dynamics are positive; from 14% in December, the figure dropped to 12%.

Could this situation provoke a rise in prices? Bloomberg Economics Russia economist Alexander Isakov believes that the effect will not last long: “I think that the main reason for such high consumer sentiment is the state of the labor market: a large labor shortage, unemployment at 2.9%. Salaries are rising. So, in October 2023, according to the latest data from Rosstat that we have, it increased by 9% year on year.

The second factor that has historically closely correlated with consumer expectations is the foreign exchange market. After the ruble stabilized and became closer to the level of 90 than 100, people became more confident in the future.

On the one hand, our demand now, including credit, is indeed growing much faster than product output in consumer-oriented industries. On the other hand, thanks to these same positive expectations, our production is growing.

That is, if we cool demand, then retail in 2024 will feel worse than in 2023 with a slowdown in consumer lending.”

The Central Bank also spoke about business sentiment – enterprise price expectations are at their highest since April 2022. While the public is optimistic, companies are confident that the cost of their products will grow by about 8% annually. And this is understandable, says Dmitry Polevoy, investment director at Astra Asset Management: “Consumer sentiment is high, people are ready to spend money. And in these conditions, companies certainly take advantage of every opportunity to raise prices at the highest possible pace.

In this way, businesses can compensate, in particular, for the growing costs that were associated with a weaker ruble, sanctions pressure and the need to constantly solve payment logistics problems. In addition, companies, judging by surveys, are faced with increasing problems in hiring employees and the need to increase salaries at a high rate.

To ensure that profits do not suffer, businesses actually raise prices. And this is one of the reasons why we do not expect inflation to slow down quickly.

Despite the positive surprises that we received in terms of inflation dynamics in December, we are still far from reaching comfortable levels for the Central Bank.”

Meanwhile, the regulator is still optimistic about inflation this year. According to the Central Bank, high rates will lead the indicator to the target of 4%, maximum 4.5%. The macro forecast of economists surveyed by the Bank of Russia is slightly different: analysts expect inflation to be 5% in 2024. But the population’s expectations may still bring an unpleasant surprise, says Igor Nikolaev, chief researcher at the Institute of Economics of the Russian Academy of Sciences:

“As a rule, a period when inflation expectations grow in the manufacturing sector is followed by their growth in the consumer sector. Therefore, you should not calm down. This is rather a worrying factor, and inflation expectations may rise again.

Manufacturers look a little further, and they fully admit that price stabilization is now occurring due to the fact that the key rate has been greatly increased. And most importantly, political factors have an influence, namely the presidential elections. Because, of course, it is extremely important that consumer inflation does not rise right now. But then it has the potential to grow when this period ends.

At the same time, the Bank of Russia, first of all, still focuses on the inflation expectations of the population. After all, they ask him for consumer inflation first of all. And since now there are reasons for optimism in this regard, then, of course, the regulator will not worry much and will certainly not raise the key rate.

Now there is such a short period of respite for the Central Bank.”

Earlier, the Central Bank reported that it sees room for a rate cut in the second half of the year. Previously, the Ministry of Finance stated that the rate would go down only in the fourth quarter.

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Ivan Yakunin