Russia's Unexpected Consumer Spending Boom Amid Wartime

- Russia's consumer spending has surged despite initial fears of economic collapse following the 2022 invasion of Ukraine, driven by rising wages in the defense industry and state spending. - Real wages have increased by almost 14%, with consumption of goods and services up by around 25%, transforming the lives of blue-collar workers and boosting the luxury sector. - The central bank's efforts to control inflation with high interest rates have been overshadowed by state spending, leading to concerns about long-term economic stability. - The booming real estate market, fueled by subsidized mortgages, and increased domestic tourism highlight the shift in consumer behavior due to sanctions and travel restrictions. - Labor shortages, particularly in the defense sector, and the potential for an economic slowdown raise questions about the sustainability of this consumer boom. Source: FT