Bumpy road ahead for Hungarian retail sales

Retail sales closed 2020 on a negative causing disappointment. But we've reset our expectations, as the second wave of the pandemic is causing more and more wreckage to the economy. But, now as we see the first bits of actual 2021 data, we're unsure about the retail sector’s performance start to the year.

After such a weak December, the 0.5% month-on-month increase was better than anticipated, but still, we can’t say that the sector jump-started. Compared to the same period of the previous year, retail sales turnover is down by 2.6%, although adjusting for the calendar effect, it is only a 1.8% drop.

Fuel sales have remained the main drag on the retail sector as a whole. The volume of turnover decreased by 8.5% year-on-year. This shows a minor improvement compared to the previous month, but this could be due to seasonality. On the other hand, the number of people working from home is increasing steadily during the second wave, and the number has now reached 11.6% in January 2021 - the highest since June 2020.

The non-food retail sector remains weak, although it also showed some improvement.

The 2.2% YoY drop was supported mainly by non-specialised shops dealing in manufactured goods. However, the volume of sales fell by double-digit in furniture and electrical goods stores, books, computer equipment and other specialized stores, textiles, clothing and footwear shops. It seems that households are still focusing on savings rather than buying major goods. Even if they are buying, it is happening via the internet. The volume of mail order and internet retailing jumped by 36% YoY, reaching an almost 10% share within retail sales.

The only silver lining is food which has grown at a stable rate. In January, it was 1.5% YoY, which is still weak compared to the multi-annual average, but not that bad, taking into consideration that Hungary is still missing the massive inflow of tourists.