OREANDA-NEWS.  July 14, 2014. Sberbank Investment Research, the research department of Sberbank CIB, is publishing its eight survey of the pan-Russian consumer, the Sberbank CIB Ivanov Consumer Confidence Tracker, which monitors consumer spending, savings and confidence trends across the country.

The eight tracker indicates a recovery in the consumer confidence index, with the overall score rising to –11% from –13% in November thanks to improving employment trends and readiness to spend on durables amid prevailing macroeconomic uncertainty.

The main findings of our survey are shown survey below:

The index of country wealth expectations for the next 12 months jumped from –13% in March to –8% in June. We think that this is due to easing concerns over the ruble exchange rate (cited by just 17% of respondents versus 29% in 1Q14). As a result, we saw a sharp drop in the number of respondents describing the economic conditions as unstable (from 78% in 1Q14 to 70% now).

Improving conditions for big ticket purchases suggest that 2Q14 and June non-food sales could be less dismal than we had initially thought. That said, we would not be overly excited, as the uptick may indicate that households were previously extremely pessimistic with regard to the macro and geopolitical backdrop and we are now seeing some mean reversion. That said, the real economy is deteriorating and we expect wage growth to slow in 2H14, so sentiment could worsen again.

Unemployment remained broadly flat Q-o-Q at 9.3%, while the net hiring index dipped from –32% to –33%, as the share of companies suspending hiring rose from 18% to 20%. The Ivanovs were more upbeat on the prospects for their employers. The share of businesses expected to grow over the next 12 months rose from 28% to 31%. We also saw an increase in average wages from R28,600 in March to R29,500 in June.

Savings data were mixed. The propensity to save increased: 23% of Ivanovs now believe that this is a favorable time to save money, up from with 18% in our previous survey. The share of Ivanovs with no savings fell from 38.0% in March to 37% in June, yet the average share of monthly incomes saved dropped from 11.5% in 1Q14 to 8.8% in 2Q14.

Overall, we do not expect any further trading down relative to 1Q14. The number of price-sensitive customers remained flat at 68% in June. The proportion of respondents trying to save by switching to cheaper groceries and those cutting non-discretionary consumption were also mostly flat Q-o-Q (at 56% and 28%, respectively).

Price investments undertaken by the largest food retailers helped to smooth inflation for households: respondents did not notice shelf prices rising in 2Q14 and even commented that prices had become more attractive at Lenta, Magnit (convenience), Pyaterochka and Auchan. As a result, inflationary concerns actually eased compared with 1Q14.

Modern retail is gaining at an accelerated pace: we calculate its market share has increased 3 pp since September 2013. This explains how all the largest retail chains have been able to report traffic gains. Hypermarkets are the fastest growing format.

Leading food retailers are investing in prices amid high food inflation, which should see LFL bounce in 2Q14. They are taking market share from non-organized retail, and this should be reflected in strong 2Q14 operating results.