Russia’s retail sales recovery likely to be modest for next two months

The weak recovery in income and increasing uncertainty regarding personal financial conditions in the near future continues to pull down private spending in Russia, as indicated by the April-May’s package of economic data, noted Societe Generale in a research note.

Even if inflation has steadied around 7.3 percent year-on-year in the past couple of months, while inflation expectations have reached 13.6 percent to 14.2 percent for one year ahead, inflation as driver of consumption has expected to have been replaced by uncertain in economy and restricted social spending.

Meanwhile, the recovery seen in real wages in the first quarter has been dragged on by an insignificant rebound in disposable income that was restricted by budget sequestration, thereby impacting a widening layer of the low-income population, said Societe Generale.

On the other hand, private wage growth is expected to be absorbed by the accumulation of private deposits, as the deposit rates continue to be high.

“We do not expect a repeat of the plunge in retail sales growth (to -6.1 percent yoy in May), but the recovery will likely be modest for the next couple of months, particularly in June: we forecast a 0.6 percent mom increase (NSA) to -5.7 percent yoy”, added Societe Generale.