Russian consumer turmoil continues

Russian consumers have suffered the most during the current recession. Purchase power fell to its weakest in years as 2015 average inflation is at 15.5% y/y, pushed up by the devalued rouble and limited supply due to Russia's counter measures. Food inflation has eased due to seasonal reasons and the trend is likely to continue further due to the base effect and realised transition of the devaluation into prices. On the other hand, the government has stopped wage increases in the public sector. The unemployment rate fell to 5.2% in September from 5.3% a month earlier, continuing to support demand.

"We expect real wages to shrink further in 2016 as the future budget will see imminent cuts on the expenditure side", says Danske Bank.