Consumer confidence in Russia just sank below levels seen during the financial crisis with almost one-fifth (18%) of Russians earning only enough to buy food and other basic necessities.
The Nielsen Consumer Confidence Index dropped by seven points in the first quarter of 2015 to 72 points, as the recession in Russia and high consumer price inflation have undermined optimism over the future.
To put that number in perspective, in the first quarter of 2009 with the global financial system in freefall following the collapse of Lehman Brothers, the index never fell below 75.
Even during the worst of the Great Recession, only 4.7% of Russians surveyed claimed they only had money for the basics. The current figure stands at over three times that level.
And the rest of the statistics for the Russian domestic economy make for equally grim reading.
According to the country’s official statistics bureau Rosstat, real disposable incomes fell for a fifth consecutive month in March contracting at an annual rate of 1.8%. That follows falls of 1.6% in February and 0.8% over 2014 as a whole.
The figures illustrate starkly who the burden of Russia’s recent downturn has really fallen on. While the country’s banks and state-owned enterprises have been the recipients of billions of dollars of bailout cash, the country’s citizens have had to take on the burden of runaway inflation (currently around 17%), shortages of western food imports and a stagnating domestic economy.
According to Russian business news site RBC, 55% of Russians are now being forced to save for clothes with 48% saying they are reducing the money they plan to spend on vacations.
The Russian central bank has repeatedly stressed the importance of focusing on the weakness of the domestic economy over recent months. It has pointed to weak labour productivity, low levels of investment and declining consumer demand as causes for concern.
The question now is whether the Kremlin has the desire or the ability to address the situation. After all, the fall in the oil price might be temporary but the belief of its citizens in their future prosperity is what Russia desperately needs if it is one day to succeed in diversifying its economy away from commodity exports.