HU: A pleasant surprise in retail sales

Volume of retail sales increased by 5% y/y, according to the calendar-adjusted figures in April. Meanwhile, the March figure was revised upwards from a mere 0.4% y/y to 0.8% y/y. The unadjusted yearly figure was 6.8%, probably due to the impact of Easter. Compared to March, the volume of sales increased by 2%.

Among the three main branches, calendar-adjusted sales volumes increased by 3.7% y/y in food shops and by 4% y/y in non-food retail branches. Meanwhile, automotive fuel retailing increased by 2.4% y/y in April.

The 2% monthly increase in sales volume is strong and encouraging after rather subdued figures of previous months. This positive correction was partly supported by the longer weekend at the beginning of April. Additionally, the increase in real wages and various administrative price-reducing measures by the government might have supported improving propensity of households to spend more. Looking ahead, slowing but still positive real wage growth this year coupled with different welfare measures to come into effect mainly in the last quarter might further reduce cautiousness. All in all, households' consumption is to remain the main growth driver of the year. Cautiousness is justified, however, as the overall weak state of the economy may further ease the tightness of the labor market, which may again have a negative impact on consumption.