Two bits of good news on retail sales and industrial output

HUNGARY - In Brief 07 Sep 2020 by Istvan Racz

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Most recent data releases by the Statistical Office (KSH) have provided for some rare good news on the economy, even if only in relative terms.For one, retail sales rose by 1% yoy in July, following -4.3% yoy in Q2, the latter contributing to a -8.6% yoy outcome for household consumption in the second quarter, signalling a much bigger setback to consumer services than to the turnover of tangible goods. Combining July's retail sales number with all the convincing anecdotal evidence of a major recovery of domestic tourism in July and August, the preliminary signs for Q3 household consumption are not that bad. ("I could have guests seated even on a mopping bucket turned upside down" said one restaurant owner next to Lake Balaton at some point in late July, and that was a typical comment in that period.) However, the bad side is that the renewed closure of Hungary's external borders from September 1 is bound to lead to another setback to hospitality industries, even if only in post-seasonal proportions.There is no need to emphasise that any recovery of consumption in Q3 would be most welcome from the point of view of fiscal policy, given the heavy reliance of the government budget on VAT and excise tax revenue in the first place.The other piece of relatively good news was a 7.2% mom growth of industrial output in July. True, the yoy figure was still only -7.8% in the same month, but even that should be considered a great step towards recovery after -25.6% yoy in Q2. Industrial employment started to improve already in June, when some 5k employees were rehired and the yoy reduction of the total number of employees eased back to 6.1% from May's 7.3%. We suspect that the pace ...