Hungary's Industrial Production Outlook Negative, Agriculture May Be Key to Economic Growth in 2023; Retail Sales Downtrend Continues

Despite today’s positive surprise, we still expect industrial production to be negative for the year as a whole. Therefore, we believe that agriculture could remain the sole saviour of economic growth in 2023, as the latest industry data do not seem to indicate a turnaround in domestic demand.

On a monthly basis, the volume of retail sales has been falling steadily since the end of last year, with March being the exception. The latest data from May confirm the downtrend as volume in retail shops fell by 0.8% MoM, adjusted for seasonal and calendar effects. The monthly drop reveals the fact that the pleasing improvement regarding the annualised index (-12.3%) is mainly due to base effects. Thus, there is little reason for joy as short-term dynamics do not point to a rebound in sales volume.

Looking at the breakdown, only food sales performed relatively well in May, as sales increased by 0.1% MoM. From a trend perspective, however, this is not particularly good news, as it is only the third time in the last 12 months that food sales have risen, two of which were just 0.1% increases. Nevertheless, with annualised food inflation still at a very high level of 33.5%, it is understandable that households are still cutting back on food spending. Given that real wages have been falling steadily for eight months, we do not expect to see a significant recovery in food retailing in the second quarter, despite the easing of food price pressures.

 

Breakdown of retail sales (% YoY, wda)

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