Hungary’s calendar-adjusted retail sales increased 5.7% y/y in May, statistics office KSH said in a preliminary estimate on July 5.
The reading shows an extended recovery in retail turnover following a sharp slowdown in January. Although May sales were below the robust 6.7% growth recorded in the previous month, growth remains robust. Retail sales in Hungary have been increasing since July 2013 on the back of a tightening labour market and resultant consumer confidence, and remain a vital driver for the economy.
At the same time, the remarkable slowdown of GDP in Q1, which recorded a 0.8% q/q contraction illustrates that consumption was not strong enough to fully counterbalance troughs in the industrial and construction sector.
The unadjusted retail sales figures show growth at 6.8% in May, compared to 5% in April. In specialized and non-specialized food shops, the volume of sales adjusted for calendar effects rose by 4.4%. Turnover increased 6.8% in non-food retail trade and 9% in automotive fuel retailing.
Retail sales are being closely watched across Central Europe due to consumption's major role in economic growth over the medium term. Analysts in Hungary forecast that rising employment, income tax reduction, net real wage growth - which came at 7.5% y/y in the first four months of the year - and low inflation will continue to provide a strong base for household consumption in Hungary this year.