OREANDA-NEWS. December 25, 2013. Sberbank Investment Research, the research department of Sberbank CIB, is publishing its sixth 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 sixth tracker indicates a sharp deterioration in the consumer confidence index, with the overall score falling to –13% after staying flat at –8% from March to September. Employment trends have seen a material deterioration, amplified by macroeconomic concerns.

The main findings of our survey are shown below:

Food inflation eased from 8.7% in 2Q13 to 6.6% in 3Q13, and despite a spike to 7.5% in November, the Ivanovs have finally noticed the slowdown, concerns over food prices declining slightly (63% of respondents cited it in the latest survey versus 65% in September). This is partly because several large retail chains have started to invest in traffic and have intensified promotions. We expect food inflation to soften to 6.0% in 2014, which should ease pressure on households.

Nevertheless, the number of price-sensitive customers grew from 56% in September to 59% in November; food expenditures as a proportion of the Ivanovs’ budgets edged up from 40% to 41%.

Only 16% of respondents think now is a good time for big-ticket purchases. Savings trends are slightly discouraging: the share of Ivanovs with no savings increased from 43.2% in September to 45.0% in November, and the average share of incomes saved monthly decreased from 10.6% in September to 9.1% in November.

Unemployment in our sample rose from 9.9% in September to 11.8% in November, which can only be partially explained by seasonal factors. Meanwhile, the net hiring index declined from –34% to –38%, as the number of respondents saying that their employer is hiring people dropped from 12% to 9%. This translated into a decline in nominal incomes from R20,300 in September to R19,400 in November and explains the deterioration in the confidence index.

Our survey shows that X5 Retail Group’s stores are finally showing tentative signs of improvements for the first time since we started our survey. The share of Ivanovs selecting X5 Retail Group stores as their primary shopping destination climbed from 18.6% in September to 19.3% in November. Pyaterochka stores were the main contributor.

The number of stores in walking proximity to the Ivanovs’ homes now stands at 4.5 in urban areas, of which 2.0 stores are leading public retail chains (1.0 Magnit, 0.8 Pyaterochka, 0.2 Dixy).

Dixy Group’s chain is the most concentrated as it predominantly operates in four regions: Moscow, St Petersburg, Ekaterinburg and Chelyabinsk. Most of the stores are in the regional capitals, so the Ivanovs have 0.65 Dixy stores in these cities. This number is still below those for Magnit and X5 Retail Group, though Dixy Group is introducing new stores in these cities much faster. Hence we consider that the company is the most exposed to cannibalization, a factor that will keep putting negative pressure on its LFL.

This proprietary publication includes a headline consumer confidence index and also provides a set of leading indicators for the most important trends exhibited in the country’s rapidly growing consumer sectors (retail, banking, telecoms, media, IT, real estate and transportation).

The survey is executed by market research agency Cint on behalf of Sberbank CIB and is conducted every two months under a methodology that closely mirrors that of the State Statistics Service’s quarterly survey and EU confidence assessments. However, our survey is expanded to encompass a wider set of questions relevant to Russia’s middle-income consumers. The survey sample is 2,300 people, aged 18 to 65 and living in 164 cities with a population of over 100,000 inhabitants. The tracking error is below 2%.