Retail sales in Hungary fell for the fourth straight month on an annual basis, down 12.6% year-on-year (chart) in March and by 13.1% when adjusted for calendar year effects, the Central Statistics Office (KSH) announced on May 5. Sales in all three major categories plunged, albeit from a high base, due to robust pre-election transfers. On a monthly basis, retail sales edged up 0.8%, but that was mainly due to rising demand for fuel.
A detailed breakdown of the data shows adjusted retail sales fell in all types of shops, with a few exceptions: sales rose 11.1% in second-hand shops and edged up 0.2% at drugstores and pharmacies.
Food sales declined 10.3% y/y in March, non-food sales dropped 9.6% and vehicle fuel sales were 29.3%. Food sales accounted for 49% of the total, non-food sales for 35% and sales at petrol stations for 16%. The volume of mail order and internet retail sales, accounting for 7.8% of the total, fell by 14%.
The decline of Hungarian retail sales was the second steepest in the EU, according to Eurostat. The largest annual decrease was recorded in Estonia (-13.5%), followed by Hungary (-13.2%) and Slovenia (-12.8%).
The impact of one-off cash handouts has faded and household’s incomes have been eroded by the highest rate of inflation in Europe. The sharp fall in retail sales is compounded by the abolition of the fuel price cap in December, Portfolio.hu noted.
Excluding fuel sales, retail sales have been falling for six straight months, ING Bank senior analyst Péter Virovacz commented. The decline in sales of furniture or consumer durables shows consumers are drastically cutting back on spending on items considered a luxury.
Europe’s highest food inflation has forced Hungarians to save on food, and many are postponing the purchase of non-essential items. A regional survey showed that among V4 countries, Hungarian consumers were the most prone to reduce spending
The high base and falling real wages will keep retail sales depressed in the first half, but the double-digit wage growth and moderating energy prices could support a second-half pick-up, analysts said.
In Q1, retail sales dropped an unadjusted 9.2% and an adjusted 9.5% as food sales fell 8.1%, non-food sales dropped 7.2% and vehicle fuel sales shrank 19.1% y/y.
The disappointing retail data reflects a deteriorating economic outlook.
The first-quarter GDP due out on May 16 will most likely show the second straight quarter of contraction, confirming a technical recession. The annualised data could also be negative, as construction and industry are also a drag on growth. Industrial data showed output falling for the third straight month in March, down 4% y/y, while output of the construction sector contracted for the third month in a row.