DT-Global Business Consulting identified in Russian market outlook research a retail sales rise of 5.6% in March, the best monthly figure in 10 years, as people stock-piled. Inevitably with lock-down, the retail sector collapsed in April by a record -23.4%, the worst monthly figure in 25 years. The April fall consisted of -9.3% in food stuffs and a -36.7% in durables. By June the fall in retail sales had slowed to -7.7% (compared with June 2019). As in other countries, the “foot fall” is rising and some outlets are seeing a return of more than 75-85% of pre-crisis levels. BUT actual spending is not returning as quickly, at least for the more discretionary products.
The Russian state support has been comparatively limited, it has had positive effects in stemming the fall in household and retail spending:
Federal budget spending in the first half of 2020 (year on year) includes an 80% rise in non-pension social payments (aimed at unemployment benefits and childcare support), 109% increase in healthcare expenses and a 64% rise in transfers to regional budgets.
Such transfers mean that the share of spending on household income (through state sector salaries, pensions and other social benefits) in the consolidated budget will rise from a high level of 56% in 2019 to 60% in 2020. The cut in spending for now seems to stem from reduced consumer loans rather than reduced money in the pocket (although that will come).
The retail loan portfolio declined in April 2020 by 130bn Rubles ($1.75bn) month on month while in April 2019 last year it grew by 320bn Rubles ($4.3bn). In June, new consumer loans were still growing at a sizeable 12.6% but this was heavily down on the 19% figure last autumn and the 17.8% figure at end of Q1 2020. So not surprisingly, Russians are borrowing less (for cars, mortgages) and ‘saving for a rainy day”. And retail bank deposits (33% of citizens hold bank accounts) were stable posting annualised growth at about 10%.
Travel restrictions also play a role: each year Russians spend about $50bn on foreign travel. This year we estimate this will be down by -50% and so some $25bn will stay in the country. By the way, the $25bn remaining in the country is of course good news for the rouble!
By the end of 2020, retail and household spendings should be turning positive on a monthly basis.
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