Retail sales in Hungary are showing signs of recovery as the decline slowed to 1% (chart) in December, the best monthly figure for the year.

On an adjusted basis, sales slipped 0.2% year-on-year and the monthly 1.4% growth was the biggest increase since March 2022, data from the Central Statistics Office on February 7 showed.

Retail sales have been contracting since December 2022 as the spending power of Hungarian households was eroded by skyrocketing inflation and rising living costs.

For the full year, the sector contracted 7.9%, which was the steepest decline since 1995. The volume of retail sales is still below pre-pandemic levels. Food sales fell 4.6% in 2023, non-food sales dropped 6.4% and vehicle fuel sales were down 19.5%.

In December, adjusted food sales rose 1.3%, non-food sales fell 3% and vehicle fuel sales were up 3.8%. The latter figure was the result of the phase-out of fuel price caps a year ago. The large increase can also be attributed to customers anticipating the upcoming significant excise duty increase from January.

In absolute terms, retail sales reached HUF1.81 trillion (€4.7bn) in December.

 

The steep fall in inflation from mid-2023 has improved the purchasing power of households and consumer sentiments have also improved significantly, but the recovery of the retail sector will be gradual as households remain cautious.

Falling sales of big-ticket items, furniture and, electronics show that Hungarian households remain cautious and presumably it will take more time to see rising real wages translate to higher consumption.

ING Bank expects gradually increasing consumer confidence to be one of the pillars of the economic recovery this year, a good sign as the outlook for Hungary’s export-oriented industry is  not rosy due to the global economic slowdown.

The government aims to restore growth in 2024 by keeping the investment rate above 25% and further boosting labour market activity, helping the recovery of retail sales, the Ministry of National Economy said in a statement.