Consumer activity in Russia has focused on the back of ongoing deleveraging of private sector balances and poor nominal wage growth since the beginning of 2016. Wide-spread volatility of ruble in January-February has contributed negatively to consumer confidence as increasing uncertainty in the oil market has lowered the possibility of economic rebound, particularly through H1 2016, and especially, through the fiscal channel.

Russia’s headline inflation decelerated significantly to 8.1% y/y. However, the indexation of pensions implemented since 1 February is likely to have very little effect on income effects due to the very moderate scale of 4%.

On the micro level, more expensive goods are replaced with cheaper substitutes that might prompt a lagging impact on implied sales deflators. Also, a secondary market of durable goods is gaining popularity, particularly in the automobile segment. Preliminary data indicates that secondary car sales grew 10.9% y/y in February for the first time since 2014, whereas primary sales continued to decline, dropping 13.4% y/y.

Therefore, the contraction in retail segment likely slowed slightly to -0.2- 0.3% m/m in seasonally-adjusted terms in February. However, on an annual basis, the performance might have changed significantly, declining 6.5% y/y in February, as compared with the drop of 7.3% y/y in January.