Hungarian Retail Sales: A Stagnant Story

Retail sales in Hungary continue to disappoint, offering little cause for optimism. Since April 2024, the sector has been stuck in stagnation, with recent data providing few signs of improvement. Despite some positive indicators, the figures remain well below expectations.

According to the latest data from the Hungarian Central Statistical Office, June’s weak performance was followed by an equally lackluster July in terms of retail sales. Market watchers were surprised by the results, which came in lower than even the most pessimistic consensus forecasts.

After a 0.2% drop in June, July showed a seasonally and calendar-adjusted 0.0% month-on-month change, confirming that sales volumes across the board have been flat for months. While year-on-year comparisons show a 2.5% increase due to last year's low base, this doesn't signify real growth. Retail sales have been roughly 1% below their 2021 monthly averages for the last four months, casting doubt on any claims of sectoral expansion.

"All this means that our earlier view that economic fundamentals are weak and that only a one-off outperformance can temporarily paint a positive picture remains valid," economists at ING Bank in Budapest noted. "And in recent months we have not even been able to count on this one-off effect in the retail sector."

A look at the details
A closer look at the data reveals that food retailing was a surprising drag on July’s performance, posting a 0.7% monthly decline, despite expectations of a boost from UEFA EURO 2024. While non-food sales had offset poor food sales in June, this was not the case in July. Non-food sales managed only a 0.1% rise, with online sales and clothing stores seeing notable declines. Fuel sales, however, provided a slight reprieve, increasing by 0.4% as prices dropped sharply at the end of the month, keeping the sector from outright stagnation.

Overall, the start of the third quarter has been far from encouraging, with total retail sales still about 1% below their pre-pandemic levels. Despite high wage growth and a solid labor market, consumer confidence remains too low to spark significant spending. Households are focusing on rebuilding reserves and reducing debt, and any meaningful recovery in consumption may not materialize until early 2025, when significant coupon payments to retail bondholders are expected to inject fresh money into the economy. Until then, Hungary’s retail sector appears to be in a holding pattern, with full recovery still on the horizon.