A rather poor but unsurprising retail sales figure in April

HUNGARY - In Brief 06 Jun 2023 by Istvan Racz

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Retail sales fell by 0.9% mom, 12.1% yoy on seasonally and day-adjusted basis in April. Previously, it decreased by 12.8% yoy in March and by 8.5% yoy in the whole of Q1. Overall, retail sales dropped by 10.4% yoy in the first four months of 2023. This sounds like a rather poor performance indeed, but it is not at all surprising. We have been saying for a while that from the consumer demand point of view, Q2 may look the same bad or perhaps even slightly worse than Q1 this year, because of the coincidence of tough income (wages, pensions) and monetary (consumer credit, etc.) policies on one hand, and still high inflation in year-on-year comparison on the other hand, with a very strong base in early 2022 (election campaign fiscal gifts). Retail sales data for May and June are also likely to look ugly, although the year-on-year fallback of sales is likely to decrease progressively from month to month. Note: in real terms, year-on-year changes in % So, the government and the MNB are unlikely to be surprised by this data either, meaning that it should not provoke a policy response in itself. What is likely to come is the continuation of the currently seen mix of gradual easing from the MNB, depending on improvements in monthly inflation figures (we expect 22.6% yoy headline CPI-inflation for May, down from 24% in April), very strong political statements regarding the government's anti-inflationary commitment from PM Orbán ('we must crush inflation, whatever it takes' most lately), and a series of completely incalculable unorthodox steps to improve the budget's position, etc. by limiting the efficiency of MNB policies, usually coming from the Economy Ministry. By the way, Q...