The income crisis that has lasted for five consecutive years continues to undermine the economic sentiment of Russians.
The consumer confidence index, which is calculated by The Conference Board and Nielsen, fell from 67 to 65 in the fourth quarter of 2018, coming close to the bottom that was set in 2016.
The percentage of consumers who lack “disposable income” and who are forced to spend all their earnings solely on basic needs grew from 19% to 23% between October and November.
The number of Russians who can afford to buy new clothes fell from 36% to 32%, and the percentage who can afford entertainment outside the home dropped from 29% to 24%. 64% of Russians are cutting down on their expenditure on these two articles, with an increase of 10 and 8 percentage points respectively in the fourth quarter.
The percentage of Russians with a positive outlook on the job market for the next six months fell from 19% to 18%. The number of respondents who expect financial well-being dropped by 1 percentage point to 30%, although the proportion of consumers who are ready for expenses grew from 19% to 21%.
The prolonged reduction in earnings and the uncertainty concerning the prospects of the job market have caused consumers to be even more pessimistic in their appraisals of their future financial standing, observes Maria Volkova, director of analysis and consulting at Nielsen Russia.
According to Volkova, in the fourth quarter, survival became the primary concern for Russians due to the increase in food prices. For October-November, the number of consumers worried about this jumped by 12 percentage points to 35%, reaching a high since the middle of 2016. According to the survey, more than half of the population is attempting to cut back on food spending.
At the end of 2018, the Russian population’s real disposable income fell for the fifth year in a row. For 2018, the disposable income indicator, which is the amount retained after inflation and all obligatory payments, fell by 0.2%. The indicator dropped by 1.2% in 2017, 5.8% in 2016, 3.2% in 2015 and 0.7% in 2014.
According to the Russian Federal State Statistics Service, last year the average Russian lived on 32,635 rubles (about $500) per month – equivalent to 1072 rubles ($16) per day. The nominal growth of 1,213 was completely negated by inflation, which had nearly doubled by the end of the year, at 4.3%.
The recent VAT hike is taking 500 billion rubles out of consumers’ pockets, equivalent to a 1% decline in real income, notes Natalia Orlova, chief economist at Alfa-Bank.