Huge crisis approaching Hungary? Retail traffic plummeting unstoppably

Shop traffic has been in a free fall in Hungary recently. In February, the contraction reached 10.1 percent. According to an expert, Hungarians spend as much as at the start of the coronavirus pandemic. But then, almost all the shops closed. Now they are open, but Hungarians do not have enough money to spend. Furniture and technical stores suffer the most while traffic in second-hand shops is soaring.

According to rtl.hu, Hungarians are saving money. As a result, the Hungarian Central Statistical Office (KSH) measured a 10.1 percent drop in shop traffic last month. The decrease is as high as it was in April 2020 when the pandemic outbreak made a lot of shops close. Therefore, the masses began to shop online, and most people went to stores only when it was inevitable.

Now, the pandemic is much more quiet. But people buy less and less. Traffic in the food stores dropped by 6.7 percent, and Hungarians bought 14.5 percent less fuel in February compared to the figures a year before. Furniture and technical stores felt the most significant contractions: 19-19 percent. Meanwhile, second-hand shops and vintage stores see more and more shoppers: the increase reached 7.6 percent in February.

The double-digit contraction is significant on an annual basis. Such things rarely happened in the history of the economy, István Madár, the leading analyst of Portfólió, said. Before COVID, such trends took place only after the 2008 global financial crisis. Then, the soaring debts depressed consumption.

Among the reasons, Mr Madár mentioned the sky-high inflation, which is still above 20 percent. Therefore, the real income of people is decreasing, so they lose purchasing power. Thus, even though shop traffic increases, the quantity of the products customers buy is lower. And that can no longer be explained by the termination of the fuel price cap scheme. Now, it is clear that the Hungarians deliberately cut their consumption.

The analyst added that the decreasing consumption would hurt the Hungarian economy. The latest data about the decrease in retail sales and the negative figures concerning industrial production means that the recession would continue in Hungary. That means the performance of the Hungarian economy will fall in the 1st quarter of 2023, he added.

However, fewer consumers mean price rises and inflation will stop. Mr Madár said that pricing might become realistic again, and owners would implement price increases in cases where cost rises make them inevitable.