CEE ECONOMY-Hungary's retail sales growth slows in May, inflation likely weighs
By Krisztina Than
BUDAPEST, July 6 (Reuters) - Hungarian retail sales growth slowed in May after a jump in April when COVID-19 curbs were gradually ended, as people spent more on services and a rise in inflation has weighed on consumer spending.
Hungary's calendar-adjusted retail sales rose by an annual 5.8% in May following a 10.6% year-on-year jump in April, the Central Statistics Office (KSH) said on Tuesday.
Polish data published earlier also showed that retail sales growth slowed to 19.1% year on year in May from a massive 25.7% surge in April, but still exceeded analysts' forecast for 16% rise.
Even though retail data showed weakening consumer demand in May, Central Europe's economies are still poised to show a rapid recovery this year.
Czech and Polish manufacturing hit a record pace of activity for the second month in a row in June, and Hungary's PMI also rose comfortably above the 50 mark that divides expansion from contraction.
Peter Virovacz, an analyst at ING in Budapest, said the Hungarian economy could grow by as much as 7.4% this year, with very strong GDP growth in the second quarter.
"Services will jump, and also we will head into elections next year so I believe we will see growing investments and consumption will also gain an impetus," Virovacz said.
"No need to panic over the retail sales data ... probably what we are seeing here is that people spend on services after the lockdown rather than things."
Virovacz said rising inflation has likely also curbed people's willingness to spend on durable goods, electronics and furniture, or DIY products. In addition, with many employees remaining in home offices or opting for hybrid ways of work, fuel consumption has still not fully recovered.
Facing rising inflationary pressures, the Hungarian and Czech central banks last month became the first in the European Union to raise interest rates since the pandemic started in early 2020. (Reporting by Krisztina Than; Editing by Alison Williams)
