Retail sales growth continued to slide downhill, became negative in December for the first time since Covid

HUNGARY - In Brief 06 Feb 2023 by Istvan Racz

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Retail sales fell by 1% mom, 1.3% yoy in seasonally and calendar-adjusted terms in December. This was the first negative yoy growth number since March 2021, and it continued a marked straight-line slowdown that started with April 2022. For a few months in late 2022, this deceleration was contained by a rapid expansion of the sales of subsidised fuels, but that fell out of the picture, when the retail subsidy was discontinued on December 6. Note: Yoy growth in real terms, %; Source: KSH The December figure was no surprise at all. The chart above shows rather clearly that retail sales has been following the similarly downhill movement of real wages lately, as the otherwise rapid nominal wage growth (16.8% yoy in November) has been unable to keep pace with the even faster rise of CPI-inflation (24.5% yoy in December). Actually, nominal wage growth decelerated a bit in November, as the chart below suggests, apparently driven by the general cooling of the economy. So, it looks like the price-wage spiral, which was starting to develop in previous months, appears to have been broken (somewhat). Note: Yoy changes in %, nominal growth for wages; Source: KSH All this will have to be bad for GDP but good for price stability. Indeed, producer price inflation continues to fall, mainly as a result of HUF strengthening and lower energy import prices, but increasingly due to the easing of demand pressure as well. Industrial producer prices rose by 34.9% yoy in December, a very high figure in itself, but also another downwardly step from the 43.4% yoy peak in August. Agricultural producer price inflation slowed to 49.7% yoy in November from the September peak of 61% yoy, and merchandis...