The View 9

RETAIL MARKET

40

ANITA CSÖRGŐ Director, Head of Advisory & Transaction Services, Retail

STRONG RETAIL ECONOMIC FUNDAMENTALS

Due to positive macroeconomic fundamentals, wages continued to evolve in 2019, which – coupled with record high employment and solid tourism statistics – resulted in a strong domestic consumption growth across the country. The nationwide purchasing power again recorded double-digit (+11.4%, y/y) expansion – of which retail gained an even greater share than last year. Retail spending is not projected to lose any significant proportion of total disposable income, thereby creating space for a sustained rise in countrywide retail trade looking ahead. Although the y/y growth in overall retail sales has decelerated somewhat over 2019, the 6% figure is still the second-highest in the past 15 years. On a regional perspective Hungary stood out again and after several upwardly revisions the country ranked only second to Romania (+6.6%) in terms of retail trade growth across the EU last year, based on Oxford Economics. The domestic retail turnover remained driven by the non- food sector (+9.2% y/y), led by an outstanding increase in demand for manufactured goods (+13.2% y/y). Other, similarly important non-food sector showed quite an improvement from 2018: fashion – even with the persistently unfavourable VAT environment – rose by 4.8% y/y, furniture and electrical goods, health & beauty all showed robust, but below-average increases of around 5% from last year. Our CBRE Shopping Centre Index, however, indicates a turnover growth of only 2-3% in Budapest shopping centres - the gap is partially explained by the growing share of online trade. Based on the Hungarian Central Statistical Office, mail orders and web purchases expanded most rapidly across all retail categories over the past 12 months, by over a third. A big chunk of this increase came in late Q3 during the post-summer sales period. Currently, the sector accounts only for ca. 6% of total retail sales but the projected growth until 2024 has been revised upwards several times. Based on leading retailers’ recent experiences the share of e-commerce could increase steeper than expected; it will though probably not reach the CE-5 average of more than 13% in a five years horizon. Relying on this expectation, Hungary’s retail industry remains the most offline-driven across the EU in the next five years. The most popular product categories that will drive e-trade in the following years are consumer electronics and appliances, apparel and footwear, media products and F&B.