Further moderately negative data on retail sales, foreign trade and the PMI

HUNGARY - In Brief 06 Jul 2020 by Istvan Racz

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More accurately, the new data is very negative at face value; it is moderately negative only in the sense that it does not seem to provide evidence for any further deterioration of the current performance and of the macro outlook, as compared to our current, as we believe, reasonably pessimistic forecast. And somehow it is typical of the times we are going through that no further deterioration from the existing pretty bad conditions is already reason for some satisfaction.So, more specifically: the volume of retail sales was up 6.1% mom in May, translating to -2.9% yoy in the month, following a revised 9.3% yoy in April. This seems to support our -7.2% yoy forecast for Q2 household consumption, after +4.3% yoy in Q1, given that services are expected to look even worse than the sales of physical goods. But some recovery is evidently present already, and quite logically so, as the bulk of the Covid-19 restrictions on retail shops, supermarkets, etc. were removed in the middle of May. For June, further improvement is likely, but its speed will be most probably contained by the lack of the usual crowds of foreign tourists and the fact that unemployment benefits are starting to run out for those who applied for those already in March. (In Hungary, the maximum availability of such benefits is limited to three months only.)For foreign trade, we are still at the publication of April numbers and, understandably, they look very poor. Merchandise exports fell 34.7% yoy, whereas imports dropped by 23.2% yoy in volume terms, and the monthly trade balance for merchandise trade made a swing to a HUF 195bn deficit from a HUF 80bn surplus in the same period of 2019. Annualised, the swi...