MNI says consumer sentiment in Russia down, Sberbank argues it’s edging up

By Andrei Skvarsky.

A monthly survey by a Deutsche Börse think tank suggests that consumer sentiment in Russia has dropped by more than 10% since the start of 2014 and plummeted to its lowest level since March 2013 because of global fallout from Russia’s annexation of Crimea.

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The research firm, MNI Indicators, said its survey-based Consumer Indicator declined 5.4% on the month to 89.1 in March from 94.1 in February, leaving sentiment 8.4% down on the period a year earlier as the Ukraine situation hit personal finances and made consumers cut back big-ticket spending.

“The threat of further sanctions and weakness in the currency, coupled with near zero growth in the first quarter has seen consumer confidence fall by more than 10% since the start of 2014,” MNI Indicators said in a report.

The monthly MNI Russia Consumer Sentiment Survey involves data collection through computer-aided telephone interviews (CATI), with each interviewee selected randomly by a computer. At least 1,000 interviews are conducted each month from cities nationwide.

Five questions are asked.

They are about a respondent’s current personal financial situation compared to a year ago, their current willingness to buy major household items, their anticipated personal financial situation one year from now, and their projections of overall business conditions one year from now and for the next five years.

The responses underlie the MNI Russia Consumer Indicator, where 100 means positive and negative answers are equal in number, values above 100 indicate increasing positivity while values below show increasing negativity.

“Russia’s actions in Ukraine were never going to be costless and consumer confidence has taken a battering over the past two months as worries over their personal finances and the outlook for the economy have grown,” MNI Indicators chief economist Philip Uglow said in a comment on the latest survey.

A sister survey by the company “has already shown a hit to companies following the events in Ukraine and, together with the consumer data, suggests Russia’s economic malaise will continue or worsen,” he said.

The findings of MNI Indicators appear to contrast with those of a quarterly survey by Sberbank, Russia’s state-controlled number-one lender, which suggests consumer confidence has been creeping up since November.

The latest Ivanov Consumer Confidence Tracker, “indicates a recovery in the consumer confidence index, with the overall score rising to –11% from –13% in November thanks to improving employment trends and readiness to spend on durables amid prevailing macroeconomic uncertainty”, Sberbank CIB, the lender’s investment arm, said in report.

“Ivanov”, the commonest Russian family name, is used to represent the average Russian consumer.

“The index of conditions for big purchases improved from –23% in November to –17% in March 2014. This may be explained by people’s desire to protect their savings from ruble devaluation,” it said.

Sberbank CIB said 18% of respondents in the latest poll compared with 16% in the previous survey believed that today was a favourable time to save money.

The survey also showed that the unemployment rate had gone down and “the net hiring index bounced from –34% to –32%, which coincided with improved growth expectations for the companies where Ivanovs are employed”, the report said.

At the same time, the proportion of price-sensitive customers among the respondents grew to 68% in the first quarter of 2014 from 63% in September 2013.

Fifty-five percent of those questioned had switched to cheaper staple foods over the last two to three months, and consequently food spending shrank to 39% from 40% of the Ivanovs’ budgets with the savings ratio edging up to 11.5% in the first quarter of 2014 from 10.6% in September.

Furthermore, 29% of respondents in the latest poll versus 18% in September had ruble devaluation concerns, with more Ivanovs converting their savings into foreign currencies.

Surveys underlying the Ivanov Consumer Confidence Tracker are carried out by market research agency Cint on behalf of Sberbank CIB.

According to Sberbank CIB, they are based on a methodology that closely mirrors methods used by Russia’s State Statistics Service’s quarterly surveys and European Union confidence assessments but encompass a wider set of questions relevant to Russia’s middle-income consumers.

The polls cover 2,300 people aged 18 to 65 in 164 cities with populations of more than 100,000. The bank says the tracking error is below 2%.

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