Unfortunately, retail sales mirrored the trend in industry: after a month of positive results, disappointing data soon followed. In May, Hungarian retail sales performed poorly. The sector shrank by 1.3% on a monthly basis, which equated to a 2.1% year-on-year increase – far below the market’s expectations. Together with industrial performance, May’s retail sales data will negatively impact the overall economic outlook.
Clearly, the strong start to the second quarter was a one-time occurrence, with negative corrections in both the retail sector and industry already evident by May. Nevertheless, we still do not believe that the Hungarian economy will show negative quarter-on-quarter growth in the second quarter, and therefore we can probably dismiss the possibility of a technical recession. However, based on the data so far, the April-June period does not look economically strong.
Furthermore, the ‘two steps forward, one step back’ pattern persists when examining the long-term trend. Retail sales volumes are increasing in a saw-tooth pattern, which aligns with the overall growth trend. However, this growth trajectory is far from smooth or steep. Volatility remains high and is likely mainly driven by one-off effects, such as government retail bond payouts, corporate bonuses and extreme calendar effects. Accordingly, the evolution of the fixed base index shows that, following the significant increase in April, a correction occurred. Nevertheless, retail sales volumes are 1.7% higher than the monthly average for 2021. Based on data from the second quarter so far, this is a better result than in the first quarter. Therefore, we can probably expect a positive GDP contribution from consumption.