Poor retail sales and industry data for October

HUNGARY - In Brief 06 Dec 2023 by Istvan Racz

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Retail sales (volume terms, seasonally and day-adjusted) shrank by 0.3% mom, 6.9% yoy, the latter following -7.7% yoy in September. The Q3 figure was -7.7% yoy, and January-October was a 9.1% yoy fallback in total. The fixed-base chart (December 2010 = 100, courtesy of KSH) looked like the one below: Industrial output (volume terms, sda) also fell by 0.6% mom, 2.8% yoy in October, the year-on-year data actually getting better than September's -5.9%. Q3 was -4.9% yoy, and for the whole of January-October, 4.6% yoy decrease was reported. The fixed-base chart (December 2010 = 100, from KSH) was not much nicer than the one for retail sales: All this means that the officially much-awaited recovery is still not happening with the thrust that the government's key policymakers would like to see. For industry, the reasons are obvious: on one hand, it is the evident weakness of domestic demand, and on the other hand, one cannot expect any spectacular performance from the predominantly industrial merchandise exports, with the latest (November) values of 87.3 for Germany's IFO and 44.2 for the Euro Area's manufacturing PMI, in view of Hungary's deep vertical integration with those industrial sectors. However, the continued weakness of retail sales is probably more painful, given the often repeated official party line that once real wages growth (yoy) gets positive again, as a result of falling inflation, consumer demand will necessarily pick-up, leading to more VAT proceeds, a happier nation and better prospects for next June's election. And indeed, real wage growth became positive again already in September (+1.7% yoy), and yet retail sales growth is still deeply negative, intole...