On the last summer month, retail sales contracted 7% y/y (chart) according to raw data and by 7.1% when adjusted for calendar effects. On a monthly basis, sales edged 0.5% lower.

The decline was much steeper than the EU average.

The performance of the Hungarian retail sector in August was a major letdown and signals that turnaround of the sector is still far away, analysts commented.

The annualised data continued to show a decline despite the fading of the base effects. Consumers began to reduce spending in the second half of 2022 due to rising energy and food prices. The double-digit decline in real wages has set back consumption in all segments.

Food sales dropped 4%, non-food sales shrank 5.2% and fuel sales were 18.1% lower in August.

Food sales accounted for 48% of the total, non-food sales for 34% and sales at petrol stations for 18%.

 

The volume of mail order and internet retailing, accounting for 7.3% of the total, was unchanged. 

In absolute terms, retail sales came to HUF1.6 trillion (€4.1bn)

In the first eight months, retail sales dropped an unadjusted 9.5% and an adjusted 9.6% year-on-year as food and non-food sales dropped 6.6% and 7.3% annually respectively, while vehicle fuel sales tumbled 21.3%.

The projected rise in real wages from September is expected to lift consumption and the sector braces for positive growth in the fourth quarter, Erste Bank analyst Janos Nagy commented.

ING Bank analyst Peter Virovacz said the projected rise in real wages is unlikely to translate into dynamic consumption growth, as households will primarily focus on reducing their debts and replenishing their reserves before consumption picks up. This is also indicated by the fact that consumer confidence remains near a ten-year low, he added.

The collapse of Hungary’s retail sector led to a plunge in VAT revenues compared to the target. The government blamed the widening deficit on the HUF900bn gap in VAT proceeds compared to the target. The Finance Ministry has recently revised its deficit target from 3.9% to 5.2%.