Russian consumers feel the squeeze

The latest data have given mixed signals on the performance of Emerging Europe’s economies. The encouraging news is that growth in much of Central Europe (particularly Poland and Hungary) seems to be holding up well. Admittedly, data released this month showed that growth in most economies slowed a touch in the final quarter of last year and January’s activity data were a little weaker than expected too. But given the headwinds generated by renewed problems in the euro-zone as well as Russia, the slowdown in growth has been pretty modest. In most cases it seems that external weakness has been broadly offset by a strengthening of domestic demand. The news from elsewhere in the region, however, has been less encouraging. In particular, data released over the past month have provided the first signs that Russia’s economy is starting to feel the effects of lower oil prices and the steep fall in the ruble at the end of last year – with consumers bearing the brunt of the economy’s problems.