MORGAN STANLEY: Russia's consumer crisis today is 'much harsher' than it was during the global financial crisis

Russia's tumultuous political adventures and structural economic problems have claimed their victim: the average Russian consumer.

"The consumer crisis in 2015 will be much harsher than 2009, with consumer stagnation lasting well into 2016. We haven't been surprised that consumers are feeling the squeeze but we are surprised by the magnitude of it," writes Morgan Stanley's Magdalena L. Stoklosa.

From Stoklosa's note:

"We believe the consumer will be hit harder in 2015 than in the 2008-9 crisis. We see the key headwinds coming from 30%Y RUB depreciation and double-digit inflation eroding real incomes, the public sector nominal wage freeze, higher unemployment and household deleveraging.We expect the lower income population to be hit harder by the crisis.

As a result, we expect consumption to contract by 8.4%Y in 2015. Looking into the patterns of behaviour, we see non-food retail sales (-11.4%Y) contracting deeper than food sales (-5.0%Y). We expect household savings to be flat as consumption falls in line with real incomes."

Interestingly, while Russian consumers aren't doing so well, the government is enjoying high approval ratings.

Over the last fifteen years, the biggest gold star on Putin's political report card (in the eyes of the average Russian) was the fact that incomes increased and the economy improved tremendously during his first two terms.

Consequently, some analysts believed that the poor economic situation following the various problems in 2014 might hurt the president's popularity in 2015.

But that's certainly not been the case. And, according to Morgan Stanley analysts, that suggests that "fiscal support is still far off":

"It has been peculiar in this crisis that despite falling real incomes, the approval ratings of the president, prime minister and the government have increased. Also, the political cycle means that there is no pressure to improve well-being in the short term as the next parliamentary elections are only in December 2016 and presidential elections are in 2018. In fact, the government welcomes wage adjustment as wages have been consistently running ahead of productivity growth for the past several years," writes Morgan Stanley's Stoklosa.

If there's a bright side, it's that the "worst is over in terms of confidence and consumer expectations," Stoklosa said. And that's largely attributed to rising oil prices, the strengthening ruble prices, and the (relatively-speaking) lower inflation.

The bottom line is: the average Russian consumers are struggling, but the government's popularity is through the roof.