Industry and retail sales data: good news on growth

HUNGARY - In Brief 06 Feb 2022 by Istvan Racz

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Monthly data for December appear quite good from the growth perspective. Industrial output growth rose to 3.6% yoy, after 2.2% yoy in November and negative figures in the preceding two months. Indeed, this was the best figure seen since July, the last month of the initial post-Covid recovery phase., Thus, output grew by 9.6% in the whole of 2021, following a 7.1% decrease in the Covid-hit year of 2020.Similarly, retail sales growth accelerated to 5% yoy in December from 3% yoy in the previous month, the best figure in the series seen since June. This implies full-year growth of 3.5% in 2021, after a 0.1% decrease in 2020.Probably influenced in part by this data, finance minister Varga has just raised his 2021 GDP growth estimate to 6.8-6.9%, from the 6.4% prediction the Ministry had been holding since the last days of December. The previous adjustment of their estimate was a downwardly move, in view of various weaknesses like Covid, the car industry, rising inflation, etc. Given that the Statistical Office (KSH) is set to report Q4 2021 GDP on February 15 in first estimate, i.e. quite soon, Mr. Varga's new figure must be close to what the Office will eventually communicate.So it seems that official optimism regarding growth is strengthening. This may be important for the next steps of monetary policy as well. Whenever politicians are more confident about growth facts and prospects, they tend to be less concerned by the strong forint. Consequently, the MNB has more of a free hand to tighten policy further in such cases. Next time, this may become relevant at the Council's rate-setting meeting on February 22, especially if the January CPI-inflation data, due on February ...