Retail sales may have reached the bottom of the trough in June

HUNGARY - In Brief 04 Aug 2023 by Istvan Racz

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Just as expected, industrial output and retail sales data for June was not particularly encouraging, to say the least. Industry fell by 0.9% mom and 5.5% yoy, the latter implying -4.9% yoy in Q2, following -3.6% yoy in Q1. The usual pattern of early this year was continued: car manufacturing and electric engineering (mainly batteries for cars) were growing rapidly, whereas the rest of industry, especially the branches producing primarily for domestic sales fell sharply. The following  chart shows industrial output on a fix basis (December 2010 = 100), in volume terms, seasonally and calendar-adjusted, just as all the foregoing numbers (source: KSH): Evidently, output has been on a decreasing trend since its peak level reached in September 2022, the main reason being the weakness of domestic sales. Retail sales grew by 0.7% mom, but it fell by 8.3% yoy in June, implying a 10.9% yoy drop in Q2, after 8.5% yoy reduction in Q1. This sounds extremely weak, and indeed it was, despite the well-known unfriendly base effect in the year-on-year comparison. But one piece of good news can be still found in these results, and it was the moderate positive change by the volume of sales in June, compared to May. This was the first positive monthly move since November last year, and in fact only the second one since March 2022, after which the ongoing macroeconomic adjustment, especially through fiscal policy, started. Here is a similar fix-base chart on retail sales, as the one on industry above: The small uptick that can be seen at the very right end of the chart offers the viewer a bit of hope that consumer demand may have come to the bottom of its trough or at least may be approach...