The main increase in inflation expectations in November occurred among families with savings

A noticeable November surge in inflation expectations, recorded by the Central Bank after their short-term stabilization (see “Kommersant” dated November 24), apparently, is not accidental. The population – from the middle class and workers to the poorest households – is not only again interested in consumption, but also has or expects to receive the resources for this: demand is fueled by the observed rise in prices and expectations of further increases in income. This may force the Bank of Russia to raise the key rate again in December 2023.

The main increase in inflation expectations in November occurred among families with savings (39% in November), “although since the summer, against the backdrop of the collapse of the ruble, they have been more stable – apparently, prices for durable goods, imports and cars – and foreign trips,” notes independent economist Dmitry Polevoy. Moreover, after a two-month pause, according to the Central Bank, in November there was also an increase in the consumer sentiment index. And although the balance of assessments of the favorableness of the moment for savings has shifted in favor of deposits, the balance of answers to the general question of what is better to do with free money, save or spend, decreased from 30 to 21 points – a minimum, almost like in August 2020.

In addition, in November, according to Central Bank surveys, the share of families with consumer loans or loans increased sharply – to 41% (the maximum since May 2022) from 37% in October – primarily for the purchase of non-food products or cars.

At the same time, according to October data, assessing the impact of the credit-deposit channel on consumer spending (the difference between the monthly increase in unsecured consumer lending and ruble funds of the population on deposits), many macroeconomists noted its restraining influence on consumer activity. Lending slowed in response to the key rate increase and tightening macroprudential limits, and household deposits grew along with rates, which was accompanied by a transfer of funds from demand accounts to time deposits. It was expected that this effect would only intensify, and the growth rate of consumer spending would decline in the coming months.

However, in October, according to the Association of European Businesses (AEB), the demand for passenger cars (especially Russian ones, the production of which is subsidized) grew, as did the consumption of other non-food products, as evidenced by SberIndex data.

“Perhaps this is a sign of “pre-crisis” credit consumption in anticipation of a further rate increase,” analysts at the Center for Macroeconomic Analysis and Short-Term Forecasting (CMACF) suggested in the November “Analysis of Macroeconomic Trends.”

The likely expansion of lending to the population (even if it did not grow in volume) may indicate a surge in its demand among less wealthy families to maintain consumption levels. According to TsMAKP estimates, in September 2023, “an accelerated increase in prices for the “basket of the poor” (outpacing average inflation) continued. “Kommersant”), which could reduce the effectiveness of social policy and lead to the expansion of poverty”: pensions adjusted for “inflation for the poor” began to decline in September for the first time since the summer of 2022.

Consumer sentiment is supported by the labor shortage and expectations of rising wages and bonuses. In November, industrial companies surveyed by the Gaidar Institute fully restored their hiring plans after a symbolic September decline and “updated the “sub-sanction” maximum” – the balance of this indicator is plus 22 points against the absolute record of plus 23 points in January 2022. “The industry is not only ready to hire workers at a record pace, but also plans to increase their wages at a record level. In November, the balance of expected changes in wages reached the maximum of the entire period of monitoring this indicator in 2014–2023,” the authors of the study record.

Although Kommersant has repeatedly recorded in recent months that hiring and salary growth plans are still poorly converted into real offers on the labor market, this does not exclude their influence on consumer sentiment, especially since employers de facto have no other ways to increase employment.

VTB First Deputy Chairman Dmitry Pyanov is convinced that the Central Bank has not yet achieved its goal of stabilizing inflation and has many reasons for a new rate increase at its meeting on December 15. Among the factors indicating that the regulator’s goals have not yet been achieved, he names high rates of lending, the situation on the labor market, expectations for wage growth in 2024, intentions of retail suppliers “to increase prices by double digits in the next quarter,” and most importantly, plans to increase budget expenditures.

Artem Chugunov