By Andrei Skvarsky.
Monthly polls of ordinary Russians by MNI Indicators, an intelligence unit of the Deutsche Boerse group, suggest that consumer confidence in Russia has been fizzling out steadily for months and in January hit the lowest mark since the surveys were launched in March 2013.
The MNI Russia Consumer Indicator, an evaluation system based on the polls, shows consumer sentiment in the country plagued by falling oil prices, monetary instability, high interest rates and Western sanctions to have plummeted by 32% year-on-year, according to a statement from MNI Indicators.
Each poll consists of telephone interviews with about 1,000 urban residents who are selected randomly by a computer.
MNI Indicators puts five questions to them: What their current personal financial situation is compared to that a year ago, how they see their personal financial status one year from now, whether they are willing to buy major household items, what they expect overall business conditions in Russia to be like one year from now, and what they anticipate them to be like for the next five years.
Rising pessimism was recorded on all five points in last month’s survey. Expectations for long-term business conditions were particularly bleak: a 20.6% year-on-year decline in confidence.
As personal finances go, four-fifths of respondents said they were worse off in January than a year ago. Falling income was cited as the main reason, but a growing proportion pointed to losses stemming from investments, most likely as a result of the depreciating ruble.
Inflation was eating away a large part of household finances. Consumers had the greatest concern over prices since the polls started nearly two years ago, while “the sharp increase in inflation expectations to a record high suggests that inflation will continue to increase”, MNI Indicators said.
“Confidence fell off a cliff in January as the crisis in Russia reached a new level,” said MNI Indicators chief economist Philip Uglow.
“This month’s survey was devoid of any bright spots with consumers reeling from the combination of high interest rates and inflation. With the rouble under pressure, oil prices at a low level and no realistic plan of action from the government, our panel of respondents are gloomier than ever before and see no improvement in either the short or long-term,” Uglow said.
“The renewed escalation in fighting in the Ukraine and the possibility of additional sanctions against Russia further threaten the already bleak outlook for economic growth this year,” he said.