The MNI Russia Consumer Sentiment Indicator fell to 69.2 in March from 73.1 in February, the lowest level since the survey began in March 2013. Consumer sentiment is now down 22.6% on the year following a prolonged downturn which began even before the onset of the Ukraine crisis.
Four of the five components that make up the MNI Russia Consumer Sentiment Indicator declined to series lows in March. Only Business Conditions in Five Years rose slightly on the month, although consumers remained pessimistic overall due to a potent cocktail of higher interest rates, plummeting oil prices, spiralling prices and the standoff with the West.
There was a sharp fall in consumers’ short-term expectations for business conditions, leading the decline in overall sentiment, whilst consumers’ perception of the current environment for doing business was the worst on record. Pessimism surrounding the outlook for the job market also hit an all-time high.
Consumers were less confident than ever about their financial situation, making them less willing to buy a car, house or large household good in March. In spite of the central bank cutting the key rate twice since the beginning of the year, the majority of our panel continued to expect that the cost of credit would rise which may further constrain purchase sentiment in the future.
There were tentative signs that inflation may have peaked with Inflation Expectations easing slightly.
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, "Consumers are facing a torrid time at the moment and the outlook suggests they will continue to do so for some time to come. While the government is making some effort towards supporting spending through subsidising car and house loans, it’s difficult to see these having a significant impact for the time being.”
“Just as it was for our business survey, consumer sentiment in the first quarter of 2015 as a whole was the lowest in the survey’s history. Even though official data recently confirmed that Russia was able to eke out some growth in the final quarter of 2014, our indicators suggest the economy probably contracted in the first quarter of 2015.”
Following a review of our current methodology, we have made various improvements this month.
Methodological Review
Following a review of our current methodology, we have made various improvements this month in order to better match the demographics of Russia and provide more accurate data on key Russian cities.
The consumer survey is a random survey of urban consumers and for this reason is weighted (by region, age and sex) to give a true reflection of the Russian population. We have applied new weights to the economic regions and also decided to remove Kaliningrad due to its small size. This has allowed us to increase the sample size for both Moscow and St. Petersburg.
This new methodology has been applied across the entirety of our historical data meaning that all data points have been revised.
The changes to the weights as well as the final calculated values are relatively small. Over the entire series the MNI Russia Consumer Indicator has been revised up by 0.6% on average. In the 12 months to February 2015 it was revised up by 1.4%, with a notable upward revision to 70.6 in January from the previously reported value of 67.5.
