Hungarian industry started the second quarter on the wrong foot, as evidenced by the 0.7% month-on-month (MoM) decline in April. As a result, the year-on-year (YoY) index showed a slight improvement to -2.8% according to the working-day adjusted data.
However, despite the improvement in the annual index, the short-term dynamics paint a rather disappointing picture, as the volume of industrial production continues to decline compared to the monthly average in 2021. In this respect, ING analysts have reported a deterioration of 0.6ppt compared to the previous month, as the volume of industrial production in April was 2.5% lower compared than the monthly average in 2021, according to the seasonally and working-day adjusted data.
After a significant positive surprise in March, things also turned negative in April for Hungary's retail sales.
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At the component level, non-food retailers surprisingly posted a growth rate similar to the nearly 1% monthly increase seen in March. It's worth highlighting two segments: second-hand goods and cosmetics, both of which displayed robust MoM growth.
However, in line with the detailed GDP data, sales of durable goods remain relatively subdued, as households seem to be spending more on experiences and daily necessities.
Households' precautionary motives will need to diminish further, and consumer confidence needs to strengthen as that indicator has deteriorated slightly over the past two months. Without those two factors, a sustainable recovery in the retail sector will be tough.
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