Retail sales was trying to climb out of the ditch with moderate success in November

HUNGARY - In Brief 08 Jan 2024 by Istvan Racz

---

Retail sales grew by 0.8% mom in November, the best figure seen since March 2022, according to this morning's report by KSH. On fix basis (Dec 2010 =100), the volume of turnover developed as follows: The encouraging increase in November must have been greatly supported by the 3.1% compensatory increase (supplementary adjustment for higher-than-planned inflation) paid to  old-age pensioners in that month. To indicate the scale, government-paid pensions represent 7.5% of GDP (as opposed to the 13.7% average in the EU), so not a very great amount, but the compensatory increase was paid out for 11 months this time (retroactively for each month from January last year), and that is already significant. But the bad part of the story is that retail sales turnover was still at last February's level (see the chart above). And in yoy terms, it still fell by 5.9%, after -6.7% in October and -7.4% in Q3: Apparently, the yoy changes curve of retail sales (the blue line) has failed to follow the much more dynamic real wages curve (the red line), despite the earlier expressed hopes of key government decision-makers. But no great surprise, as both wages and prices were largely flat in November, and the yoy increase of nominal wages was slowly edging downwards in that month, following the sharply falling headline CPI-inflation rate from a certain distance: As kind of a conclusion, growth still appears to be slowly-slowly strengthening but genuinely weak, which is bad for the budget but much better for inflation and the BOP.