Sberbank CIB Ivanov Consumer Confidence Tracker Update
The consumer confidence index has returned to its pre-downturn level
25 April 2018, Moscow – Sberbank Investment Research, the research department of Sberbank CIB, today publishes its 23rd survey of the pan-Russian consumer, the Sberbank CIB Ivanov Consumer Confidence Tracker1, which monitors consumer spending, savings and confidence trends across the country.
The twenty-third tracker showed the consumer confidence index improve from -10% in 4Q17 to -9% in 1Q18, thus returning to its pre-downturn level. Consumer shopping habits continue to normalize in line with a reduction in trading down.
Consumer confidence index
Source: Cint, Sberbank CIB Investment Research
The main findings of the survey are shown below:
- There were Q-o-Q improvements in the perception of personal wealth (by 2 pp to 12%), country wealth over the previous 12 months (by 2 pp to -15%) and in big purchase conditions (by 1 pp to 19%). Importantly, the improvements were thanks to a steady, gradual recovery in key metrics, suggesting they should be sustainable, assuming no further turmoil. We see the improved sentiment as a reflection of higher real incomes in 1Q18 on the back of stably low inflation (1.3% both in 1Q18 and 4Q17, according to official statistics).
- The survey indicates that wages rose by 6.8% y-o-y in 1Q18, below the 12.0% growth that the State Statistic Service recorded. The Ivanovs plan to spend any wage increases on food (18%, while 38% of incomes are currently spent on food), clothing and household goods (14%, with 16% currently spent on the category) and savings (13%, just 7% saved currently). The savings ratio jumped to 7.2% from a record low of 6.5% set in 4Q17 and 7.0% in 1Q17.
- The share of those who have sought to save on staples over the past two to three months (i.e. curbing impulse buys and switching to cheaper food items) has been gradually decreasing since 2Q17 and dropped 6 pp y-o-y and 1 pp Q-o-Q to 64% last quarter. Despite the gradual decline in the share of those trying to save on food, the share of promotion hunters remained high. Some 24% of respondents always bought most of their groceries at one store but stopped by another one to pick up items on sale (in line with the previous quarter and 1 pp more than a year before), while 54% do so occasionally (up 2 pp Q-o-Q and y-o-y). At the same time, the share of those who are cutting down on discretionary spending is declining as well.
- The unemployment rate among our respondents dropped by 1 pp Q-o-Q to 9.9% in 1Q18, its lowest level since 2H14. Underemployment (the share of those employed part-time but willing to work full-time) reached a record high of 11.1%, up from 9.7% in 4Q17 and 9.0% a year earlier. Meanwhile, the net hiring index stayed flat Q-o-Q at -35.2% in 1Q18, and up from -36.5% in 1Q17.
- In terms of the population’s concerns, the overall picture did not change much last quarter. Corruption (cited by 64% of respondents), unemployment (55%) and inflation (48%) remained the three top concerns of the population. The latter was despite the stable low officially reported inflation of 1.3%. Only 18% of respondents were troubled by the ruble exchange rate, in line with the previous survey.
- In keeping with the lower food inflation and ease in trading down, the share of those who considered prices an important factor in grocery store selection decreased to 71% from 73% in both 4Q17 and 1Q17. This was the lowest level since end 2014 and close to the pre-downturn levels.
- The percentage of those citing product quality increased 1 pp Q-o-Q and 3 pp y-o-y to 69%, in line with the average for 1H14. This indirectly indicates that the Ivanovs have fully adjusted their food spending, although it still comprises 38% of total spending, above the historical average of 36%. Sberbank Investment Research analysts think food spending will eventually return to previous levels but only after a notable increase in real incomes.
This proprietary publication includes a headline consumer confidence index and also provides a set of leading indicators for the most important trends in the country’s rapidly expanding consumer sectors (retail, banking, telecoms, media, IT, real estate and transportation).
The survey is undertaken by market research agency Cint on behalf of Sberbank CIB and is now conducted quarterly under a methodology that closely mirrors that of the State Statistics Service’s quarterly survey and EU confidence assessments. However, our survey is expanded to encompass a wider set of questions relevant to Russia’s middle-income consumers. The survey sample is 2,300 people aged 18 to 65 and living in 164 cities with a population of over 100,000 inhabitants. The tracking error is below 2%.
1 The surname “Ivanov” was chosen to represent the most common Russian family name. The Ivanovs represent middle-class Russia.