Bloomberg News

Russian Retail Sales Probably Surged Last Month as Prices Eased

October 17, 2011

Oct. 18 (Bloomberg) -- Russian retail sales probably rose the most in more than a year in September as banks boosted lending and slower inflation lifted purchasing power.

Retail sales rose 8.5 percent from a year earlier, the quickest pace since August 2010, according to the median estimate of 13 economists in a Bloomberg survey. Real wages grew 4.7 percent, the fastest this year, a separate survey showed. The Federal Statistics Service may release the data this week.

Inflation eased last month and won’t exceed 7 percent this year, the lowest rate since 1991, according to the central bank. That’s bolstering consumers even as exports suffer amid a weaker global economy and the euro region’s debt crisis. Russians are using bank loans to step up purchases of durable goods such as cars and home appliances, said Julia Tsepliaeva, chief economist at BNP Paribas in Moscow.

“Consumption now is growing mainly through rising loan volumes,” Tsepliaeva said yesterday by phone. “That’s shifting spending habits toward non-food items.”

Loans to households grew 3.6 percent in September from a month earlier, Mikhail Sukhov, a central bank department head, said Oct. 11. That’s 0.1 percentage point less than July, which had the fastest rate since at least 2009. Consumer loans rose 19.6 percent in the year through August, according to central bank data.

Supermarket Sales Slow

Sales growth slowed in the third quarter at food retailers including X5 Retail Group and OAO Magnit. The “weaker-than- expected reports from the food retailers have, in particular, raised concerns that the macro picture deteriorated in September,” Chris Weafer, chief strategist at Troika Dialog in Moscow, said yesterday in an e-mailed research note.

X5, Russia’s largest food retailer by revenue, said Oct. 10 that it experienced a “cutback in spending amid unstable economic conditions in Russia and world wide.” Magnit, the largest food seller by market capitalization, said the following day that it didn’t see “any noticeable decline in consumer activity,” noting that food prices fell 2.7 percent from a year earlier in the third quarter, compared with 2.9 percent growth in the same period of 2010.

“Even if we have strong retail figures, the key boost comes from non-foods, which are mainly imported,” Dmitry Polevoy, chief economist for Russia and Kazakhstan at ING Groep NV in Moscow, said yesterday by e-mail. “This is fully in line with the industrial production figures.”

Output at factories, mines and utilities rose 3.9 percent in September, missing all 15 forecasts in a Bloomberg survey, the statistics service said yesterday.

‘Maintaining Current Demand’

“Food retailers’ concern is clearly premature” and the situation won’t’ worsen before presidential elections next March, BNP’s Tsepliaeva said. “Rising incomes, which have boosted retail-trade growth, are unlikely to match double-digit figures seen before the crisis, but higher pensions and salaries for state workers are more than capable of maintaining the current demand.”

Disposable incomes advanced 2.3 percent in the month, up from 1.4 percent in August, according to a separate survey Unemployment rose a tenth of a percentage point to 6.2 percent in September, while investment spending advanced 6.9 percent after a 6.5 percent gain in August, two other surveys showed.

--With assistance from Zoya Shilova in Moscow. Editors: Andrew Langley, Balazs Penz

To contact the reporters on this story: Scott Rose in Moscow at rrose10@bloomberg.net; Alena Chechel in Moscow at achechel@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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