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Inflation stalking Russia adds to 'hopelessness' among consumers

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The mood among Russian consumers is souring just as inflation increasingly eats into their purchasing power.

[MOSCOW] The mood among Russian consumers is souring just as inflation increasingly eats into their purchasing power.

Faster price growth and an unsteady ruble are hurting household finances, contributing to the biggest plunge in consumer confidence since 2015 last quarter. That mirrors a broader loss of momentum in the economy, which has been slow to rebound despite higher oil prices.

Buyers are starting to feel the pinch after three months of quickening price increases. Data due Wednesday will show that annual gains in retail sales slowed in September and real disposable incomes shrank for a second month, according to economists surveyed by Bloomberg.

Fed up with the post-recession economic slog, people are succumbing to "long-term hopelessness," according to Mikhail Dmitriev, the economist who correctly predicted the largest protests of Vladimir Putin's rule in 2011 and 2012.

Citing a recent report he co-authored at the Committee of Civil Initiatives, a research group, Dmitriev said pessimism has taken hold especially after the government unveiled plans this summer to increase the retirement age. It was a letdown after the campaign before March presidential elections raised expectations that improvements were imminent.

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"People will be more cautious in their consumption," said Dmitriev, a former economy minister. "From the demand side, there will be less impetus for reviving economic growth."

Inflation is likely to climb to as much as 4.2 per cent by the end of the year and reach 6 per cent in the first half of 2019 after the government increases the value-added tax from Jan 1.

The frail health of the consumer is bad news for the economy, with growth already slipping to an annual 1 per cent in August, the slowest this year. Gross domestic product will expand between 1.5 per cent to 2 per cent in 2108 and 1.2 per cent to 1.7 per cent next year, according the Bank of Russia.

"On the back of accelerating inflation, real wages and especially incomes will start to sink," said Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki.


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