Scarcity is stronger than stinginess – Newspaper Kommersant No. 27 (7472) of 02/14/2023

Based on data on household consumption in 2022, the growth in the savings activity of the population of the Russian Federation was due, according to economists of the Bank of Russia, to factors on the supply side. In other words, the interest in savings is mainly due to a reduction in the ability to spend – this turned out to be enough. This, however, does not imply the impossibility of accelerating the process of institutionalization of savings in Russian society – but the Central Bank is worried that the fading wave of savings activity may create additional and uneven inflationary pressure.

The analytical note “Change in the structure of demand as a pro-inflationary factor”, written by Bella Rabinovich from the Department of Research and Forecasting (DIP) of the Central Bank and published by the regulator on February 13, is the author’s work, but the Central Bank’s reservation that the document reflects the personal point of view of the author is largely formal here : some of Rabinovich’s arguments were used both by the leadership of the Central Bank and in official reports prepared by the DIP earlier. However, the systematization of views on the nature of the growing popularity of private savings (see, for example, “Kommersant” from January 9) in the Russian Federation was produced by the authors from the Bank of Russia for the first time.

Recall, in a strong simplification, the process reflected by an increase in the savings rate (a purely calculated and, in essence, a synthetic indicator) in 2022 and manifested both in an increase in interest in private savings among households that were not previously interested in them, and in an increase in popularity in large cities small investments in the stock market (including foreign ones), cryptocurrencies, in private semi-formal and informal initiatives of varying degrees of severity, can be explained by two (not necessarily alternative) scenarios. In the first case, it is the institutionalization of savings that is important (recall, this process was actively promoted in 2004-2008, mainly in the form of collective savings) – and the current situation in household incomes and changes in consumer preferences only give it shape and change at a particular moment the volume of fresh money inflow into markets associated with private savings. In the second, what is happening is a consequence of supply shocks in the market due to sanctions and trade embargoes (introduced against the Russian Federation by the G7 countries after the start of Russia’s military operation in Ukraine), as well as the medium-term consequences of the COVID-19 pandemic. In favor of the first one, the influx of private investors, including small ones, into these markets began much earlier than March 2022. In addition, it is possible that the launch of the process of institutionalization of savings in this round is associated with the saturation of long-term consumer needs of some households.

Bella Rabinovich shows in her work that the arguments in favor of the second scenario, in which the main problem is on the supply side, generally cover current observations, and the first scenario is, in essence, not needed.

The author demonstrates that in its current form, the growth in savings is a consequence of the obviously forced savings model of 2021 after the start of the pandemic, which at the end of the first quarter of 2022 had already changed to the usual consumer model, but the start of hostilities (which are reflected in the Central Bank as uncertainty and the weakening of the ruble) returned the population to the same savings model in an enhanced form, supported by a reduction in everyday unnecessary expenses and “accelerated accumulation of savings”. Further, a discrepancy between the dynamics of supply and demand in household consumption was recorded and “significant changes were noted in the structure of household spending”: for example, already in September 2022, spending on services returned to the level of 2019, and taking into account spending on public catering, they significantly exceeded it.

Only the share of spending on non-food products has steadily decreased, where “the shrinking of the assortment has become the determining factor”: “double-digit lag rates” from the levels of 2021 are demonstrated in the categories of clothing, sports, furniture, telecommunications equipment, household appliances – and, of course, the collapse of the assortment was the main factor in the car market. The hypothesis that the decline in demand in the second half of 2022 was caused by the rush demand in March-May is refuted: in the sectors under discussion, this effect was weak or absent. In the food segment and services, there was simply no market contraction.

Thus, Rabinovich comes to an unambiguous conclusion: the restrictions are not on the demand side (which would confirm the hypothesis of the “voluntary” savings to the detriment of consumption), but on the supply side, in this capacity, changes in the structure of demand are inflationogenic, perhaps demand will shift towards services .

The researcher of the Central Bank considers the change in personal financial strategies to be insignificant.

The author does not wait until 2024 for a systemic change in the product supply, which normalizes the structure of consumption, when “the dynamics of supply may begin to outstrip the dynamics of demand.” It does not follow from this that the current “savings boom” will have completely exhausted itself by this moment, however, the Bank of Russia clearly expects that there will not be much left of the current fashion for savings – unsatisfied demand, primarily for cars, will still take its toll.

Dmitry Butrin