Hungarian retail sales look tragic

Retail sales look bad. Period. Yes, we all knew the third Covid-19 wave would impact the economy, but the stricter lockdown was imposed only in March, so there was a tiny ray of hope that retail sales might pick up. Not anymore.

In contrast, retail sales turnover dropped by 1.2% on a monthly basis and thanks to last February’s buying frenzy before the first lockdown in 2020; the base was quite high. This translated into a 5.9% YoY volume drop in retail sales (working-day adjusted). So, part of the weak performance is just technical, but the monthly drop is hard to understand amidst such sound labour market data (only 4.5% unemployment rate) and close to double-digit wage growth (9.5% YoY).

Consumer confidence dropped in February, so the news that a new round of strict lockdown is looming translated into an even stronger precautionary saving among households. In the short run, this is bad news but could translate to even stronger pent-up demand when the long-awaited reopening happens.

In such an environment, all of the main subsectors in retail showed a significant retreat on a yearly basis. Fuel sales have remained the main drag on the retail sector as a whole. The turnover volume decreased by 10.4% year-on-year, as working from home continues and fewer people commute via cars. The non-food retail sector showed a 3.3% YoY drop. Part of it comes from the elevated base as households tried to refill their medicine cabinet before the outbreak in February 2020. Besides shops selling manufactured goods, every other sector showed a yearly based retreat in sales.

In the past months, food retail was the silver lining, but by February, even that disappeared.

On a yearly basis, retail sales turnover decreased by 3.5% in such shops. Of course, you can partly blame the stockpiling panic which provides a high base, but nonetheless, this is a weak performance.