Russian Car Sales Plunge as Weaker Ruble Hurts Consumer Demand

May 13, 2014 10:31 am ET

May 13 (Bloomberg) -- Russia’s sales of new cars and light commercial vehicles fell 8 percent from a year earlier in April as a weaker ruble stokes inflation and curbs consumer spending.

Automakers sold 226,526 vehicles last month, the Association of European Businesses in Russia said today in an e- mailed statement. Economists in a Bloomberg survey predicted sales would drop 2 percent after remaining unchanged in March.

“It’s obvious that recent price increases forced by a weaker ruble are taking their toll on consumer demand that had been fragile to begin with,” said Joerg Schreiber, Chairman of the AEB Automobile Manufacturers Committee. “In the framework of a sluggish economy, this situation is unlikely to change.”

The U.S. and the European Union are threatening to widen sanctions against Russia, imposed after it annexed Crimea, if President Vladimir Putin doesn’t do more to ease deadly unrest in Ukraine. The worst standoff in more than 20 years between Russia and its Cold War adversaries pushed first-quarter capital flight above the total for all of 2013.

The ruble has weakened 5.5 percent against the dollar this year, the second-worst performance among 24 emerging-market currencies tracked by Bloomberg after Argentina’s peso. The currency curbed its losses after Putin last week asked two Ukrainian regions to postpone referendums on greater autonomy.

Inflation quickened to 7.3 percent from a year earlier in April and may reach 7.6 percent in May or June before slowing to 6 percent to 6.5 percent by late-2014 or early next year, Economy Minister Alexei Ulyukayev said today in Kaliningrad. Russia may fall into a recession in the second quarter, he said.

--With assistance from Olga Tanas in Kaliningrad.