ACRA: Consumer confidence to grow in Russia by end of 2019

MOSCOW, May 17 (PRIME) – Russia’s consumer confidence is to grow by the end of 2019 thanks to lower inflation expectations, Vasilisa Baranova, senior analyst of the sovereign ratings and forecasting group at the Analytical Credit Rating Agency (ACRA), told PRIME on Friday.

The consumer confidence study of The Conference Board and Nielsen seen by PRIME showed that the Russian consumer confidence index dropped by 3 points on the quarter to an all-time low of 62 points in January–March showing that Russians prefer to reduce costs and save.

“This decline of the index looks quite pessimistic amid the positive dynamics of some economic indicators. For example, according to our estimates, the population’s real wages slightly rose in the first quarter,” Baranova said.

A seasonal factor and a large number of consumers, who underestimate the level of their financial prosperity and readiness to spend money, are among the reasons behind the index decline, she said.

“These factors are connected with their expectations of rising prices for food and utilities. This may be due to the increase in value-added tax (VAT) at the end of last year. Although contribution of this factor has been almost fully taken into account in inflation, inflationary expectations are an indicator with a rather 'long memory’,” she said.

“This could also be due to a non-zero probability of various negative events for the Russian economy (sanctions, trade wars, etc) that may be associated with the weakening of the ruble and rising prices. However, according to our forecast, inflation will decrease by the end of the year to around 4.7% year-on-year. Therefore, we will probably see an increase in consumer confidence index relative to the current level by the end of the year.”

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