Mediocre numbers for industry and retail sales in January

HUNGARY - In Brief 08 Mar 2021 by Istvan Racz

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Industrial output changed by +0.2% mom, -3% yoy on sda basis in January, following a much better +1.4% yoy in Q4 2020. Similarly, retail sales changed by +0.5% mom, -0.9% yoy on sda basis in January, representing no improvement from -0.9% yoy in Q4. All figures are in volume terms, of course. In both cases, the beneficial effect of the seasonal and calendar adjustments was quite significant: on unadjusted basis, industry fell by 6.7% yoy and retail sales was down by 2.6% yoy.These are not particularly bright figures, to say the least. They seem to reinforce our expectation of moderately negative yoy GDP growth for Q1. But we have not seen any sign anywhere that the official world or analysts would have expressly shared our view on this (i.e. negative growth in Q1), and so the newly pubished weak January data cannot be taken lightly, just as business as usual. In particular, the MNB is likely to prove extremely cautious about its reaction to either the current the relatively high EURHUF rate or the likely pickup of the headline CPI-inflation rate in the next two-three months. The latter is likely to be driven mainly by higher fuel prices: first, we expect the headline inflation rate to rise to 3.2% yoy in February (the figure is due tomorrow) from January's 2.7% yoy, and then further up towards 4% in subsequent months. But we continue to expect tightening in MNB policy just on this news, given the significant uncertainty about the impact of 3rd-wave Covid restrictions, which have taken effect for a two-week period today.