Russian disposable incomes drop in Q2 as economic data paints gloomy outlook

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Real disposable incomes in Russia fell 0.8 percent in the second quarter of 2022, preliminary data showed on Wednesday, with rising prices and restrictions linked to the conflict in Ukraine stifling Russians’ purchasing power.

Industrial output fell 1.8 percent year-on-year in June, a sharper drop than in May, and retail sales continued their slump, down 9.6 percent when compared with June 2021.

As in the previous month, unemployment was the outlier, with the jobless rate hovering at a record low 3.9 percent.

Russia’s economy is plunging into recession and inflation is still hovering near a 10-year high after Russia sent tens of thousands of troops into Ukraine on Feb. 24, triggering Western sanctions.

Data from the Rosstat statistic service showed industrial output falling further. Car production shrank 89% in annual terms, one of the industries hardest hit by Western sanctions aimed at punishing Russia for its actions in Ukraine.

But the number of people unemployed in Russia stayed at 3.9 percent of the workforce in June, its lowest since the statistics service started publishing the figure in 1992, according to the Eikon database.

A drop in real disposable incomes is a sensitive issue for the Kremlin, with rising prices hitting living standards. For years, President Vladimir Putin has promised to raise real disposable incomes, a measure of people’s purchasing power.

Retail sales, the gauge of consumer demand, which is Russia’s main economic growth driver, fell 9.6 percent in June after a 10.1 percent drop in May. Analysts had forecast a fall of 8.7 percent compared with the year-ago period in the Reuters poll.

Low-cost chain Fix Price on Wednesday became the latest retailer to note that consumers are focusing on more essential purchases as uncertainty limits impulse buying.

Rosstat also said real wages in Russia fell 6.1 percent year on year in May after a 7.2% decrease the month before. Analysts polled by Reuters had expected that real wages, which are adjusted for inflation, would fall 4.4 percent in May.