Why can’t Hungarians return to the shops?

In February of this year, the volume of retail trade in Hungary unexpectedly declined, which meant that consumer confidence has not yet been restored, and that still has to be waited for. All of this was also surprising because the minimum wage and the guaranteed minimum wage increased already in December – that is, the higher amount was already received on the invoices in January – and the teachers also received a significant wage increase.

The reasons can be manifold, Péter Virovácz, the chief economist of ING Bank, spoke in the Checklist podcast about

• the inflationary effect of the past period encourages people to save rather than spend, or how
• in households with higher incomes, where the impact of the crisis has not become decisive, the propensity to consume does not increase in the first place if they start to earn a little more.

A lot can be read from the development of retail sales. The epidemic in Hungary broke a relatively vigorous growth and in 2021 it was not possible to recover to the previous level either. This required the government distribution before the elections, the repayment of the sja, the 13th monthly pension and the gun money, which brought a vigorous but begging growth. The downturn was spectacular and painful for many due to skyrocketing inflation.

In February, according to the adjusted data, the volume of retail trade in Hungary was 4.8 percent higher than in January 2019, but in December and January it was also 5.4 percent higher. Meanwhile, the European Union average is 4.3 percent on the same basis.

Hungary – as can be seen in the figure above – leads the EU average in retail trade, but it is noteworthy that several countries in the region are significantly further away from us, at least based on their own base. This is also the case in Romania, Bulgaria, Poland and Croatia. Moreover, in these countries, not only is traffic much higher – by 20-32 percent – than before the epidemic, but the trend is also increasing.

Economist Ákos Péter Bod, university professor, former president of the MNB, also talked about why Romania left behind Hungary in terms of development in the Portfolio Checklist. You can listen to the broadcast by clicking on the player below.

There are also counterexamples

The Czech Republic, Slovakia and Slovenia are among the regional countries where the volume of retail trade is at an even lower level compared to the beginning of 2019 than in Hungary, although there is not as much difference as between the countries of the previous group and our country.

The situation in Slovakia seems to be the best among the ones below, as there is a clear growing trend.

It can be seen that Hungary’s retail turnover is not very bright in a regional comparison: four countries are light years ahead of us, three behind us, but in the case of Slovakia – if the trend does not change – then this too can turn around. However, there are EU countries, such as Germany and Italy, but we can also include Austria, where they have still not reached the level at the beginning of 2019, or have just slipped below it (Germany).

However, it is striking that in developed countries there were no spikes like in Hungary during the election year.

The Hungarian future is difficult to predict. Apparently, the precautionary motive in the consumption behavior of the population is much stronger than we thought before. However, according to the rules of economics, sooner or later residential demand must pick up, but it is difficult to say at what pace this will happen.

Cover image source: Getty Images