HU: Retail sales slowed relevantly in September

Volume of retail sales grew just by 1.7% y/y in September, according to the calendar adjusted figures, remaining well below both the consensus and our estimate. Compared to the previous month, volume of sales dropped by 1.4%, after the 0.8% increase seen in August, indicating a strong downward correction. However, according to the CSOs comment, this was partly due to September flooding situation, since within the month, the greatest decline in sales volume was observed during the period and at the locations of the defense activity against the flood.

Among the main branches, the calendar-adjusted sales volumes increased just by 1.5% y/y in food shop. It can be seen as favorable however that in non-food retail branches, volume of sales accelerated to 5.7% y/y from just 2.9% y/y, published for August. Meanwhile, automotive fuel retailing dropped by 5% y/y.

Considering the above factors, the September retail sales statistics can be seen as mixed. The slowdown of sales in food shops might be distorted by the flood effect, while acceleration of sales in non-food retail branches is an encouraging sign, regarding the restore of consumption. On the back of a relevant increase in real wages, the recovery of sales may slowly continue in the coming period. On the other hand, a more rapid growth of sales in shops is curbed by the increasing relevance of services in consumption. Slowly improving households consumption should support the GDP in the coming quarters and contrary to 2023 - would be the most relevant GDP contributor this year. Next year, the overall weak state of the economy might imply the slowdown of wage outflow in 2025, however.