As lockdown and curfew measures were eased in May, retail sales started to improve accordingly. This is just a first step in the long road to a full recovery.

After a record-breaking drop in April, retail sales turnover increased in May. Although it hardly comes as a surprise, it’s still good to see an improvement.

The volume of retail sales increased by around 6% on a monthly basis given the pent-up demand, as the government started to ease lockdowns and curfew measures in Hungary. On a yearly basis, retail sales are still down by 2.1%. So, with one month of improvement, the level of retail sales jumped a year ahead of time.

In April we dropped to a level last seen in 2017, and in May we are back to the levels last seen in mid-2018.

Volume of retail sales, 2015 = 100%

Source: HCSO, ING

The details show the least affected segment was food sales again, as turnover increased by 1.8% YoY.

Things look good after the shock but still lag compared to the pre-crisis average of 3-4%. Non-food shops, which were hit most by the regulatory restrictions were the biggest winners of the reopenings. The 0.7% year-on-year increase sounds weak compared to the double-digit figures we used to see, but after a 15% collapse in the previous month, it is still a relief for shop owners. Transport will remain heavily affected despite the reopening, impacting the demand for fuel.

Fuel retailers saw a 13.8% YoY drop in sales volume in May.

Breakdown of retail sales (% YoY, wda)

Source: HCSO, ING

Mail order and internet retailing segment are flourishing as another 59% YoY increase was recorded. The monthly turnover remained around HUF 100bn in May.

We see further improvement in the sector in the coming months, as life has gradually begun to return to normal and pent-up demand remains the main driver.

However, still lower levels of travel and transport and labour market deterioration may lead to a permanently lower growth rate in the retail sector than we experienced before the Covid-crisis. Overall, we see May data to be just the first step in a long road to a full recovery.