Rising wages and government spending drive Russia's consumption boom
Against expectations, the Russian economy is experiencing an increase in consumer spending and real wages. According to the Financial Times, Russians have more money and are eager to spend it, driving a consumption boom. This phenomenon is a result of increased government spending and labour market shortages.
According to data from the Russian Federal State Statistics Service (Rosstat), real wages in Russia have grown by nearly 14%, and consumption of goods and services by about 25%. This is a significant change compared to the early days of the invasion of Ukraine in 2022, when many business owners feared economic collapse.
Wage growth is evident across various sectors of the economy. Employees earning $340-$475 per month in December 2021 can now earn up to $1,900. There are many examples of such "spot" increases. The average salary for long-haul truck drivers has increased by 38% year over year.
Consumption boom drives the economy
Rising wages are translating into increased consumer spending. Russians are eager to spend money on domestic tourism, restaurants, and durable goods.
The boom is also visible in the real estate sector. Sergei Skatov, an expert in the Russian real estate market, notes that "developers can sell nothing all year and still be profitable. They have already sold everything they can build for the next three years."
The increase in consumption is also noticeable in the luxury sector. One Moscow resident shares that he and his wife keep a list of luxury vehicles spotted in front of their exclusive apartment complex. A neighbour proudly shows off photos of his pet lion.
Wartime economy fuels consumption boom
The consumption boom is largely driven by government spending, particularly in the defence sector. The Russian central bank also points to government expenditures as the main factor behind GDP growth.
Another concern is the lack of labour. One restaurateur in Saint Petersburg explained to the Financial Times that staffing shortages are enormous. "There are no cooks, waiters, bartenders; many people from the service sector have left," he explained. This could mean that Russia's limits to possible economic growth are already visible.
