Weak industry and retail sales data reported for March

HUNGARY - In Brief 05 May 2023 by Istvan Racz

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Industrial output, on seasonally adjusted basis, rose by 0.2% mom and fell by 3.8% yoy in March. This also meant a 3.8% yoy reduction of the production volume in Q1. The following chart shows the monthly development of the relationship between output, the EURHUF exchange rate and producer prices, in terms of % yoy changes, according to KSH and MNB data:  Retail sales rose 0.8% mom but fell 12.5% yoy in March, which converts into a yoy decrease by 8.2% in Q1. This was no great surprise after the February real wages data, which we wrote about a few days ago. We have just inserted this new figure into our regular monthly chart on the subject, showing yoy changes, as per KSH data: The KSH said that the ugly retail sales figure for March was due to a base effect, as a year ago, consumer demand was temporarily pumped up by the government's rather generous campaign gifts, paid out of the state budget. This is true, but the problem is that this base effect will likely stay with us for at least two more months. All this is relatively bad news for Q1 GDP. Here everyone, including the authorities, expects the continuation of a shrinking economy. In our forecast tables, we have -2.8% qoq, -3.3% yoy. The data made available by the KSH monthly is only loosely connected with national accounts categories. But as far as conclusions can be drawn from the former on the latter, we have got the humble feeling that our Q1 forecast may be even a bit too optimistic. From a chart on the likely quarterly breakdown of GDP growth, it seems that the MNB expected about -1% yoy growth of real GDP for Q1 in their late-March inflation report, supporting a full-year growth expectation of 0-1.5%. Anyway...