Wednesday, December 17, 2014 6:36 am
Russians are feeling the pinch from the slumping ruble, but one somewhat paradoxical result has been to unleash a spending spree as consumers snap up electronics, furniture and cars before prices soar.
In general, Russians’ spending power has gone down with the ruble — which this week hit a record low against the dollar and has lost more than half of its value against the euro due to falling oil prices and Western sanctions over Ukraine. In addition, inflation is forecast to soon climb above 11 percent.
But for those with savings who were planning to buy big-ticket imported items, now is the time to hit the shops, before prices go up drastically to reflect the new cost of imports. And for Moscow’s large stores and malls, it is boom time.
In an Ikea shop on a weekday afternoon, the section selling fitted kitchens — the highest-priced items in the store — was packed with customers. Ikea has announced that it will put up its prices for kitchens and other goods on December 18.
At a peak time for shopping ahead of the New Year, the country’s main holiday, “the number of people in the stores has gone up also because of prices going up”, the Swedish chain, which has annual turnover in Russia of more than one billion euros ($1.25 billion), said in a statement sent to AFP.
Ikea had previously promised to keep its prices the same for 2014, but the chain then explained it “could not be independent from external factors”.
Apple in late November upped its prices in Russia by 20 percent, without warning, after its products had suddenly become cheaper than in Europe, an opportunity that some canny consumers spotted.
Interest rates have shot up from 5.5 percent at the beginning of this year to 10.5 percent on Thursday and then 17.5 percent on Tuesday, but the central bank has not been able to keep a ceiling on inflation nor a floor under the ruble.
Many Russians are experiencing deja vu — they have lived through several serious economic crises in the last 25 years, when many saw their savings go up in smoke.
– Rush to buy –
Household electronics chain M.Video confirmed it had seen footfall rise in early December, partly because of a trend to start shopping earlier for New Year gifts, but also due to the ruble’s plunge.
“Customers are trying to lock in the value of their ruble savings and invest them in electronics,” said spokesman Anton Panteleyev.
When the chain held a “Black Friday” event in late November, sales went up sharply and the best-selling items included flat-screen televisions, washing machines and smart phones.
“People rushed to buy expensive things like plasma TVs, tablets, notebooks and so on, trying to save their rubles that are drastically losing their value,” said Maria Vakatova from Watcom consultancy group, which tracks high-street trends.
The tactic of going shopping when the economic situation gets tough may distinguish Russia from the West, analysts said.
“In this way, Russia is different from developed countries… There, when a crisis begins, people immediately start saving,” said Igor Nikolayev, head of the FBK Strategic Analysis Institute.
“In our country, when a crisis comes, it is accompanied by a steep loss of value of the national currency and people abruptly start spending and for a time this softens the situation somewhat.”
Such behaviour is “rational: everyone understands perfectly well that prices are going to change,” Nikolayev said.
The popular weekly Argumenty i Fakty recently advised its readers to buy electronics, cars, clothes, which are generally imported and therefore directly affected by the falling ruble.
The car market also experienced a boom, with sales of the main foreign makes sold in Russia soaring in November after having been in a deep rut for most of the year.
The Association of European Businesses, which logs car sales, said the retail demand was “extraordinary”.
Economist Nikolayev forecast this consumer boom will last “another couple of months, until people have spent all the rubles they are ready to spend.”
After that “the most difficult period begins,” he said.
The Russian central bank warned Monday that the Russian economy could contract by nearly 5 percent in 2015 if global crude prices remain at their current levels, which would cut sharply into government spending in the highly oil-dependent country.