Sales in July were an annual 4.3% higher, based on calendar year-adjusted data. Food sales fell by 2.9%, while non-food sales increased by 3.2%.

Vehicle fuel sales shot up by 27.6%.

Retail sales were worth 1,472 billion forints (EUR 3.7bn), with food sales accounting for 47% of the total, non-food sales for 34% and sales at petrol stations for 19%.

Magyar Bankholding chief analyst Gergely Suppan said retail sales growth was lower than expected, suggesting the impact of fiscal transfers early in the year, such as a big tax refund for parents raising children, has tapered off, while households deal with rising inflation.

He attributed the drop in food sales to the recovery in the catering sector as more consumers eat out rather than stock up at the supermarket.

He said retail sales growth could continue to slow in the coming months as households face higher energy bills because of restrictions on regulated utility prices and inflation bites into purchasing power.

He added that purchases by foreign visitors to Hungary could provide some relief to the sector.

ING Bank senior analyst Péter Virovácz said the fresh data show consumers dialling back consumption at the start of the third quarter as they adapt to climbing inflation.

Fiscal tightening, such as the restrictions of regulated utilities prices and the narrowing of eligibility for a popular sole proprietors’ tax, could amplify the trend, he added.

Full report available here