Hungarian retail sales – adjusted for calendar effects – increased 4.3% y/y in August, data from statistics office KSH showed on October 25. The reading confirms a preliminary estimate released earlier this month, which offered a somewhat mixed message.
The August reading represents a slight improvement compared to the previous month, when the rate of expansion slowed to 4%. However, the pace of growth remains below the hefty results seen during the spring.
Whether the August gain is enough to maintain hope that strong private consumption can continue to drive GDP growth in the second half of the year is in the balance. A sharp slide in consumer confidence in October is no help on that score.
According to raw data, the growth of sales in retail shops accelerated to 5.8% in August from 2.9% the previous month. In specialized and non-specialized food shops, the volume of sales adjusted for calendar effects rose 2.8%. Turnover increased 6.1% in non-food retail trade and 7.5% in automotive fuel retailing.
Across the first eight months of the year, the volume of sales – according to both raw and calendar-adjusted data – was 4.9% higher compared to the same period in 2015.
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 pushed to 7.5% y/y in the first seven months of the year - and low inflation will continue to provide a strong base for household consumption.