The latest economic data suggest that growth in Emerging Europe as a whole picked up further in Q3 and one of the main drivers behind this appears to have been stronger consumer spending. Retail sales in Russia rose at their fastest pace since 2014 last month and in Central and Eastern Europe (CEE) they increased more quickly in August than at any point since the global financial crisis. We think the recent consumer recovery in Russia probably has a little further to run. Inflation is likely to remain low for the next six-to-nine months at least, supporting real incomes. And there still seems to be a little room for households to continue drawing down the precautionary savings they made in the wake of the 2014/15 crisis. In contrast, tightening monetary policy and less accommodative fiscal policy is likely to take some of the steam out of consumer spending in CEE in 2018 and 2019.
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