Earnings slide drives changes in consumer behaviour

Earnings in Russia have dropped a record 6% in November. Massive job cuts and a Rouble devaluation have driven the fall. Analysts expect this trend to continue in the beginning of 2009.

In November, the average nominal salary in Russia was around $650 dollars – that’s 20% more than it was a year ago.

But official data shows Russians’ real income fell more than 6% year-on-year- the first drop since 2004.

Tatyana Orlova, Economist at ING Russia, attributes the situation to massive lay-offs and a Rouble devaluation, and regard it as a signal of a coming recession.

“It may be an indication that the economy may post negative growth as soon as next, perhaps even in this quarter. In this case we may have to downgrade annual growth forecast.”

Marketing specialists say lower incomes affect the structure of consumer behaviour in the country. Russians are buying more food, postponing purchases in the non-food segment, according to Andrey Milekhin, President of Romir Panel.

“We see that Russians are buying more products that cost less, especially food. In September food accounted for 61% of the total consumption basket. In October this figure raised to 73%. It shows that when choosing between bread and shampoo Russians are buying bread.”

Economists expect this trend to continue next year as further laid-offs are likely to come. They say that real unemployment next year will exceed the official forecast of 7.2%. Additionally, the money of Russians will be losing value as the Rouble depreciates.