Hungary's economy is already slowing, with retail sales falling for the third month in a row

Hungary’s economy is already slowing, with retail sales falling for the third month in a row

Compared to the previous month, retail volume fell 0.5% in June. The decline has been going on since April, but we must add that it is from a very high level: in the two months preceding the elections, we saw a significant increase, caused by the effect of increased income for the distribution of government funds. . Wage dynamics remain high, but the booming effect of non-recurring benefits is becoming less effective.

In the second quarter, in general, the volume of traffic increased slightly compared to the first.

Another reason for the slowdown is inflation. The rapid influx of wages is increasingly being eroded by inflation, and it is also possible that already in the fall we will see a month when annual wage growth will be below the rate of monetary deterioration, that is, there will be a decline in real value. wages.

The thaw in population demand is one of the main reasons why the growth of the Hungarian economy staggeringly slowed in the second half of the year. Many do not exclude that we will see a decline on a quarterly basis, that is, even a technical recession is not out of the question.

Examining the June data in more detail, we can see that the drop in traffic compared to May covers several regions. Among the 14 activity groups offered by KHCC, only two groups had an increase in turnover, namely food and online shopping. Despite the start of the summer travel season, fuel movement has also decreased compared to May.

Looking at the year-over-year change, the picture is of course much better, because the first three quarters of the past 12 months were also about recovering from the coronavirus pandemic. In June 2022, retail volume, adjusted for calendar effects, exceeded the same period in the previous year by 4.5%. At the same time, a loss of momentum can be felt here as well, as KSH posted a double-digit year-over-year expansion in the spring months. In June, calendar-adjusted sales volumes in mixed food and beverage stores decreased by 0.3%, in non-food retail by 2.5%, and in fuel retail by 23.6%.

Cover photo: Shutterstock

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