Ugly, yet unsurprising macro data out for April

HUNGARY - In Brief 05 Jun 2020 by Istvan Racz

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Industrial output fell 36.7% yoy, retail sales by 10% yoy, guest nights in domestic hotels by 97% yoy in April. It has been broadly expected that macro data for April - the only month spent fully under the local maximum of Covid-19 lockdown rules - would look brutally poor, and yes, exactly that is reported now by the Statistical Office (KSH). In industry, car manufacturing was hit the most, as all major car producers as well as their suppliers were closed down essentially for the whole month, due to parent company decisions. However, output also fell in all other industrial sub-sectors except for pharmaceuticals, the latter having been boosted by the epidemic. In retail sales, the usual pre-Easter shopping boom was almost completely absent this year. Finally, cross-border travel was halted by official border closures and hotels were closed down as part of the lockdown regulation.For Q2, we expect GDP to fall by 16% qoq, 15% yoy, and the data reported now seems to substantiate this forecast. In May and June, there will be most probably significant improvement, but some caution is needed to avoid any overestimation of the speed of reopening and of economic recovery. At this moment, it looks like our next GDP forecast (due to come with our July monthly report) will most probably resemble the government's current Scenario 3, in which they expect -7.3% real GDP change for 2020 as a whole.