Current structure of growth appears to be forint-positive

HUNGARY - In Brief 07 Jun 2017 by Istvan Racz

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The Central Statistical Office (KSH) published three important data sets in the last 24 hours:1. Yesterday, it reported retail sales, which rose by only 2% yoy on day-adjusted basis in April, bringing the January-April yoy growth rate down to 3%, from 5.6% in the corresponding period of 2016;2. This morning, the second estimate of Q1 GDP growth was reported at 1.3% qoq, 3.8% yoy on sda basis, the yoy figure 0.1% point stronger than the first estimate. The unadjusted growth rate, on which official speakers are expected to concentrate, was 4.2% yoy in Q1, also by 0.1% point higher than the first estimate; and finally3. Industrial output fell by 0.8% mom, sda in April, bringing down the yoy growth rate to 2.2%. Importantly, these figures came after very strong February and March results, and so the recovery of output growth remains quite substantial on cumulative basis, at +5.2% yoy, sda in January-April, up from +0.9% yoy in the same period of 2016.Graph 1Real Net Wages and Retail Sales (yoy growth rates in %)Source: KSHTogether, these figures should not change the overall growth outlook, and our 3.3% forecast for this year's GDP growth (up from 1.8% growth in 2016) still seems largely all right. But the structure of growth appears to be different from the expectations of all forecasters, official and private sector alike.For one thing, retail sales growth continued its recent trend of deceleration, despite the simultaneous acceleration of real wage growth (to 8.2% yoy in Q1). GDP details are pointing to the same direction, as household consumption expenditure was up by only 3.5% yoy, whereas total household consumption (also including social benefits in kind) by just 2....