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Russian economy stalls, retail sales boom

December 10, 2014, 19:11 UTC+3 Zamyatina Tamara
© ITAR-TASS/Grigory Sysoev

MOSCOW, December 10. /TASS/. While the Russian economy is stalled and the exchange rate of the national currency, the ruble, is falling, Moscow and many other large cities are witnessing a real retail consumption boom.

The largest household electronics retailers report a 50% surge in demand for some commodities. At first sight, it might seem this is a typical year-end situation — a juice squeezer or blender is a nice New Year gift. What makes this pre-New Year shopping stampede so special, though, is customers are buying up mostly big-sized domestic appliances — everything that has been imported at old prices before the expected upsurge.

Panic buying of motor vehicles is quite indicative. New cars are selling like hot cakes. Whereas before major car dealers were happy to sell a dozen new cars a day on the average, in November the rate has been up to half a hundred. The reason is the same: the Association of Russian Automobile Manufacturers confirms that prices will go up as of the first days of the New Year.

Real estate is in greater demand again. In Moscow and the Moscow Region, an average of 12,000 apartments were sold on the market of newly-built properties alone over the past three months. Low-price and most affordable economy class housing is on top of the list.

Russians of means, just as their counterparts around the world, have their own whims. Wealthy customers have flooded boutiques selling luxury items, jewellery above all.

“The current panic buying is quite explainable and may last a while. Amid high inflation the people with considerable savings are aware their cash may lose value. To protect their money somehow retail customers seek to invest into expensive purchases. Durables are always good buys,” says the science doyen of the Higher School of Economics, Yevgeny Yasin.

“For their part, retailers hurry to meet their customers halfway, as New Year’s Eve draws near. Supermarkets hope to maximize their profits by building up turnover, and not changing price tags. As of January the situation will change. Price hikes are expected everywhere,” Yasin believes.

“At the same time, most Russian citizens who live on ruble-denominated earnings are not very susceptible to the ongoing wave of consumerism. Wages and pensions, which are indexed depending on inflation rates, are not prone to such considerable pressures as savings are. The consumer boom is observed mostly among the members of the middle class in Moscow and other large Russian cities,” Yasin said.

Statistics available from the Bank of Russia are pointing in the same direction. At the beginning of 2014, bank clients in Moscow and the Moscow region kept on their deposits some 5 trillion rubles — more than one-third of Russians’ overall savings in the banks. Even the tiniest share of that amount is enough to invigorate retail trade.

“There are two reasons for the current surge of consumer activity. One is seasonal: on New Year’s Eve everybody is hurrying to buy presents for the family and friends. Retail sales invariably peak in December. The other cause is very specific and momentary — many purchases are speculative. People make them not because they plan to resell the purchased items later, but to take advantage of a lucrative price,” a member of the government’s expert council, Vadim Novikov, told TASS.

“The economic situation in Russia has a double effect on retail markets. On the one hand, the expected priced hikes are tightly pegged to the ruble’s slump, which fuels the consumption boom. On the other, the people’s real incomes are falling. Some people go jobless. This factor pushes consumer sentiment the other way. At this particular moment, the former trend is stronger. After the New Year holidays most people will start saving again," Novikov concluded.

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