FT: "consumer boom in Russia"

The Financial Times publishes a big article about consumer boom in Russiawhich the publication calls “amazing”Here are the main points of the article.

“As the conflict dragged on, rising wages in the booming defense industry forced civilian businesses to keep up. Without this, it would be impossible to attract workers during a period of acute labor shortages. As a result, Russia suddenly found itself at the epicenter of a consumer spending boom.”

“Real wages are skyrocketing… You have people who were earning next to nothing before the full-scale conflict… who suddenly have huge amounts of money.”says Janis Kluge, an expert on the Russian economy at the German Institute for International and Security Affairs.

According to Rosstat, real wages have grown by almost 14%, and consumption of goods and services by about 25%. According to the Russian Center for Macroeconomic Analysis and Short-Term Forecasting, real wages are expected to grow further this year by 3.5%, as well as real disposable incomes to increase by 3%.

The unemployment rate, which was 7-8% in 2022, is now at a record low for the entire post-Soviet period of 2.6%

This explosive growth in wages is felt across the socio-economic spectrum, radically changing the lives of broad sections of workers. Weavers, who in December 2021 earned the ruble equivalent of $250-350 a month, can now receive 120,000 rubles ($1,400) a month, says political scientist Ekaterina Kurbangaleeva. The average salary of truck drivers has increased by 38% compared to last year. A courier can now earn 200,000 rubles a month (more than 2,000 euros).

At the same time, Western sanctions and Russian capital controls have kept the wealthy stranded domestically. This has fueled the growth of the luxury sector, giving Moscow and St Petersburg the air of modern boomtowns.

“Everyone in the upper middle class is simply enjoying the good life.”says Moscow investor and entrepreneur Sergei Ishkov, noting the number of new restaurants and the booming e-commerce market. One Russian oligarch told the FT that “Almost everyone I know who left Russia after February 2022 and either returned or travels there says Moscow is the best city in the world.”

Many Russians feel that their financial situation is improving. More than 13% rate it as “good” — the highest figure since 1999, Rosstat reports. The number of those who rate their financial situation as “bad” or “very bad” is also at a record low — about 14% and 1%, respectively.

“People are getting such high salaries. What are Russians doing? They are consuming like crazy, and this consumption is creating domestic demand,” says Alexandra Prokopenko, a research fellow at the Carnegie Russia-Eurasia Center in Berlin. Retailers and consumers are rushing to respond. Rostiks, Russia’s successor to KFC, plans to open 100 new outlets this year, and the country’s takeaway coffee consumption has never been higher.

Domestic tourism is also booming.

An employee of one of the Russian travel booking companies notes that due to sanctions, demand for domestic flights has increased sharply, despite the rise in airfare prices. “For almost the first time, it has become profitable for airlines to fly within Russia,” — says the interlocutor.

Capital outflow from Russia has also slowed. “In the upper segment, everything is clear: people have a lot of money, they have nowhere to spend it, so they spend it on experiments. If before they withdrew money, opened some accounts, bought apartments in Montenegro, now all this money is in the country”says St. Petersburg restaurateur Anton.

The boom in consumer spending in Russia is a result very different from what economists expected at the beginning of the war.

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