17.07.23 Review

Media Optimists: Consumer confidence index has peaked due to Russians’ confidence in the favourable prospects of the national economy

Experts from the Higher School of Economics (HSE) have revealed that consumer confidence, a key indicator of public sentiment, has, in Russia, exceeded its pre-recession value for the first time, buoyed by the population's optimism about the nation's economic outlook. Similar assessments have been reported by surveys conducted by the Public Opinion Foundation (FOM) and the Levada Center. The most significant boost to consumer confidence in 2023 has come from the sub-index 'Changes in the economic situation,' with the second-highest impact attributed to positive expectations for 'short-term changes in the Russian economy.' Consequently, the surge in the index can be attributed more to the favourable information background than to respondents' assessments of their own economic circumstances. Notably, when it comes to the recovery of consumer confidence, Russia leads Europe where independent media are more critical of economic prospects.

As noted in their analysis, the Centre for Business Tendencies Studies at the Institute for Statistical Studies and Economics of Knowledge, HSE, has observed that the Consumer Confidence Index (CCI), a critical indicator of public sentiment, has been steadily rising in Russia over the past year, surpassing pre-pandemic levels for the first time. This conclusion is based on primary data obtained from quarterly surveys of households conducted by Rosstat, the Federal State Statistics Service. According to the Centre's latest report, in the first half of 2023, the CCI, calculated as the mean of five different sub-indices, reached -15, the highest result since 2020 (the pre-crisis index value in the third quarter of 2008 was zero).

During the second quarter of last year, the Centre's estimates reveal that the CCI decreased by 31 percentage points compared to the previous quarter. A similar sharp decline was observed during the 2008-2009 financial and economic crisis (36 p.p.), while the drop was significantly lower during the peak of the coronavirus pandemic (19 p.p.). The economic changes that occurred during the year were viewed negatively by 75% of the respondents.

The main impetus for the growth in consumer confidence in 2023 was attributed to the sub-index 'Changes in the economic situation,' according to the authors of the report. The share of respondents who negatively evaluated the changes in the economy over the year decreased by almost 10 p.p. in the second quarter of 2023 compared to the first, accounting for less than half of those surveyed. For three consecutive quarters, residents’ positive expectations for 'short-term changes in the Russian economy' have continued to strengthen, making the second most significant contribution to the overall CCI growth. Sub-indices reflecting assessments of the current and expected situation with their personal financial situation had a less noticeable impact. In other words, the increase in the Consumer Confidence Index is primarily linked to the favourable information background regarding the domestic economy, rather than respondents' evaluations of their own economic situation.

It is worth noting that, for the first time in the past year, those aged between 30 and 49 led the consumer confidence recovery, surpassing the younger age group (those under 30). In this middle-aged group, the Consumer Confidence Index (CCI) rose by 4 percentage points compared to the first quarter of this year, while in the younger age group, which had long been leading this indicator, it only increased by 2 percentage points. Consumer confidence also increased by the same amount in the aged over 50 years.

The authors of the study note that consumer sentiment has improved in almost all EU countries over the past year, but it still remains at historically unfavourable levels. Against this backdrop, Russia stands out significantly, demonstrating the highest level of consumer confidence recovery among the 24 European countries examined. This is attributed, in part, to the much more critical assessments of economic prospects prevalent in the European press compared to the excessively positive assessments presented in the Russian media.

The improvement in Russian consumer sentiment has also been confirmed by similar Consumer Confidence Indices (CCI) based on surveys conducted by FOM and the Levada Center. According to their data, consumer confidence was back to the pre-pandemic level in December-January, and by March-April, it had reached the highs of spring-summer 2018. However, both polling centres have recorded stagnation or even a slight decline in the indices at the beginning of summer.

FOM and Levada Center Consumer Confidence Indices (CCI), 2018-2023

According to the data from FOM, the Consumer Confidence Index (CCI) is being propelled upwards by positive expectations for the future. Compared to March 2022, these expectations have increased by 34 points, while assessments of the current financial situation have risen by 22 points. Over the past year, the Savings Index, which indicates the favorability of the current moment for saving, has experienced more intensive growth than the Large Purchases Index. However, in recent months, this gap has narrowed.

FOM Consumer Confidence Index (CCI) and its sub-indices, 2018-2023