Retail sales fell 9.8 percent in August in their steepest annual decline in 10 years, and disposable income continued to shrink, data showed Monday, despite some signs of a revival in the economy.
On the positive side, unemployment fell to an eight-month low of 8.1 percent of the work force from 8.3 percent in July and average wages edged up 5.4 percent on the year.
But the real stock of cash Russians can spend declined at its fastest annual rate since January, down by 6.8 percent. And the number of people without a job — 6.2 million — still remains nearly 40 percent higher than a year ago.
The sharp annual decline in retail sales compares with a consensus forecast for a more modest drop of 8.6 percent and with July’s slightly revised 8.3 percent fall. Retail sales rose 1.8 percent in August from July.
Consumption and retail data indicate that Russia’s once-exuberant consumerism, which contributed greatly to the country’s economic boom from 2004 to 2007, continues to corrode.
Elina Ribakova, chief economist at Citibank, said for consumption to settle, a few more months of economic stabilization, including in real wages, were needed. She predicted that the quality of life and consumer spending would improve towards the end of the year.
“The enormous fiscal stimulus will lead to improvement in industrial output, which together with the balance of payment inflows will lead to a stabilization in income,” Ribakova said.
Faltering sales have undermined expansion plans at Germany’s Obi chain, Metro Cash & Carry and electronics retailer M.Video.
Russian markets for home-improvement equipment, electronics and food will shrink this year, the companies said last week. Lending to consumers in July dropped 0.4 percent for a sixth consecutive monthly decline.
“All the positive trends reversed this year,” said Vladimir Osakovsky, a UniCredit economist. “The economic downturn slowed nominal income growth, with the foreign exchange value of disposable income eroded by the ruble’s devaluation.”
The government has allocated 15 trillion rubles ($490 billion) to fight the economic crisis that hit a year ago and shrank the economy by a tenth in the first half of 2009. So far, the government has spent about a half of that, according to Reuters calculations based on Kremlin documents.
Ribakova also said consumption would drive Russia’s short-term economic growth, as the fiscal stimulus for 2009-2010 is geared chiefly toward consumers.
The economy has grown an average of 0.5 percent per month since June, prompting officials to declare that it is entering a recovery phase.
Economic Development Minister Elvira Nabiullina said Friday that the economy contracted by 10.5 percent year-on-year in August, a worse showing than in July or June.
(Reuters, Bloomberg)