MNI Russia CSI Falls To Record Low Of 76.6 - Pressure On Household Finances Sours Sentiment

Russia consumer sentiment fell to the lowest level on record in November as stubbornly high inflation put extreme pressure on household finances while confidence in the real estate market collapsed to a record low.
 
The MNI Russia Consumer Indicator fell by 5.1% on the month to 76.6 in November from 80.7 in October, pointing to continued weakness in the economy. Consumer sentiment has fallen sharply since the onset of the Ukraine crisis with confidence now standing 19.2% below the level seen a year earlier.
 
Three out of the five components which make up the Consumer Indicator declined to record lows in November, with the fall in sentiment led by households’ views on their current financial situation.
 
Amid the decline in household finances, consumers’ willingness to make big-ticket purchases fell to the lowest in the survey’s history. Consumers also considered it to be the worst time on record to purchase a car as the increased cost of credit, following another hike in the key interest rate, likely outweighed the impact of the government’s scrappage scheme.
 
The housing market was also hit hard in November as weakness in overall consumer sentiment coupled with the high level of interest rates reduced respondents’ willingness to purchase a house to the lowest level on record.
 
Consumers revised up their inflation expectations in November as the ban on Western food imports and record low rouble have pushed inflation to the highest level since June 2011, a trend likely to continue into next year.
                       
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “Things went from bad-to-worse in November with sentiment falling sharply to an all-time low as respondents became increasingly concerned about their household finances, business conditions and the housing market.”
 
“The slide in the price of oil and significant weakening in the rouble suggest confidence could fall even further over the coming months. Moreover, it is becoming more likely that the Bank of Russia will have little option but to tighten monetary policy further, causing additional pain to an economy on the brink of collapse.” 

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