Statistics captures the rapid growth of household income and consumer demand

Statistics record the continued rapid growth in household incomes, as well as consumer demand, a significant part of which has shifted to the non-food market. The current weakening of the ruble will most likely keep private consumption high even in July, but this situation is unlikely to remain for a long time, including due to the acceleration of inflation.

Having reached a historic high in May, consumer spending (the amount of household spending on goods, services and catering) continued to grow rapidly in June. According to the Ministry of Economy, the total turnover of retail trade, catering and paid services to the population in June increased by 1% compared to May, taking into account seasonality, against a growth of 1.5% in May. In annual terms, the indicator continued to increase – by 8.8% in June against 8.9% in May.

At the end of the second quarter, the real volume of consumer spending, according to the calculations of the ministry, was 2.3% higher than the level of 2021.

The Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) clarifies that this result is primarily responsible for the rapid growth in the consumption of services and catering, while the consumption of non-food products remained below the pre-crisis level of 2021 by 6% with a noticeable qualitative deterioration in its structure.

Meanwhile, according to Igor Polyakov from the CMASF, it was the consumption of non-food products that grew at a faster pace in the second quarter of the year — against the backdrop of lower inflation, rising incomes and the realization of pent-up demand. So, if the entire volume of consumer spending on average per month in the second quarter, seasonally adjusted, grew by 1.6% (in the first – by 1.5%), then spending on non-food products – by 2.8% against an average monthly decrease of 0 .3% in the first quarter.

According to Rosstat data released on Wednesday (.pdf), it was the rapid growth of incomes that became the main driving force behind the increase in consumption.

Despite the fact that statisticians revised upward the annual dynamics of income in the first quarter of 2022 (from 0.1% to 4.4%, primarily in terms of the wage fund, payroll), the revision also affected the first quarter of 2023, in which annual growth rates increased from 0.1% to 3% due to an increase in the dynamics of the payroll from plus 2.4% to 9.9% and income from entrepreneurship, which, according to a new estimate, grew in annual terms by 18.8 in the first quarter % against growth by 13.1% a year ago. However, in the second quarter of 2023, the annual dynamics of income from entrepreneurship deteriorated noticeably (to 3.4%) against the backdrop of an accelerated overall growth in real disposable income to 5% in annual terms. The growth in real incomes was supported by a further rapid expansion of the payroll, caused by a shortage of workers and record low unemployment.

Growing in the second quarter (by 3.5%) and receipts from other types of wages, which include monetary allowances for the military and payments under contracts. At the same time, social payments and other (that is, shadow) income, as well as income from property, continued to decline in the second quarter. At the same time, the volume of shadow incomes in the second quarter amounted to 2.4 trillion rubles. against 2.2 trillion rubles. proceeds from property and entrepreneurship combined.

Recall that now the economic authorities see private consumption as the main driving force of economic activity. Strong household consumption estimates partly explain the scale of the recent tightening of the Central Bank’s monetary policy; with an annual decline of 1.4% in 2022, the regulator expects it to grow by 6-8% in 2023, which is significantly higher than pre-crisis levels, Raiffeisenbank analysts say. In July, along with the weakening of the ruble, consumer expectations of citizens began to noticeably worsen, although, judging by the data of Sberindex, the population continued to increase pent-up demand in July (see “Kommersant” dated July 26). Most likely, such a crisis surge in consumption will not last long and in the near future the dynamics of private demand will weaken, and prices will grow faster due to the increase in structural imbalances in the economy (especially in the labor market), which threatens the realization of the regulator’s expectations in terms of not only dynamics of private consumption, but also inflation.

Artem Chugunov