Russia’s wartime consumer boom is cracking as shoppers tighten their wallets

• Russian buyers are slamming on the brakes, a warning sign for the war economy.

• The central bank reports falling demand, slowing wage growth and growing nervousness among households.

• With oil and gas revenues falling and the labor market cooling, Russia’s economic engine is running out of steam.

After years of wartime splurges, Russian shoppers are tightening their grip on their wallets — a shift that portends growing stress in the country’s economy.

Growth in consumer spending has weakened in most regions, the Central Bank of Russia said in a report released Wednesday.

In October and November, demand slowed even as unemployment remained near historic lows and inflation expectations rose.

“According to retailers across the country, an increasing share of products are purchased during promotions, sales and discounts. Household behavior has become more frugal,” according to the central bank report.

Retailers in many regions are reporting weakening demand for expensive, non-essential goods, marking a sharp slowdown after the post-2022 consumption boom.

“More moderate consumption could indicate a gradual reduction in overheating of the labor market and more moderate expectations regarding future income dynamics,” the Russian central bank wrote.

Russia’s war boom is running out of steam

It’s a notable change for an economy that saw a boom in consumer spending after Russia’s full-scale invasion of Ukraine in February 2022, even amid sweeping sanctions against Moscow.

This boom has been fueled by increased defense spending and intense competition for scarce workers. Wages soared and many households embarked on spending sprees.

Today, this momentum seems to be running out of steam.

Wage growth has slowed and businesses in several regions are reporting reduced demand for labor and less urgency to hire, reflecting a slowdown in the labor market, according to the central bank report.

Many businesses have told the central bank they expect even more modest wage increases in 2026, suggesting households may be bracing for tougher times ahead.

The central bank’s latest report comes as Russia’s full-scale war in Ukraine approaches its fifth year and the limits of wartime economic stimulus measures become more apparent.

Oil and gas revenues – the backbone of the Russian budget – fell 34% year-on-year in November.

Even before that, analysts had warned that the Russian economy was largely supported by defense spending, subsidies and emergency policy interventions.

Senior officials had sounded the alarm. In December 2023, Elvira Nabiullina, governor of the Russian central bank, warned that the economy was at risk of overheating.

Last June, the head of Russia’s largest bank said the economy was “definitely and seriously overheating.”

At the same time, the worsening demographic crisis and persistent competition for labor between the military and industry continue to weigh on Russia’s growth prospects, both today and in the years to come.

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