Hungary’s wage growth accelerates in August

Hungarian wage growth accelerated in August. Gross wages rose 6.9 percent year-on-year in the month, whereas net wages rose 8.5 percent, owing to the personal income tax change at the start of 2016. In the public sector, the wage dynamic was higher, partly due to the extra salary given for the people working in social field and armed forces. Gross wages had grown 5.1 percent in July.

The net real wages rose 8.6 percent year-on-year, mainly due to the fact that inflation was just -0.1 percent year-on-year in August. Moreover, the number of employees rose 2.2 percent year-on-year. This rise came mainly from the private sector. Thus there is a stable and relatively quick increase in wage mass.

The pressure on the salaries might continue in the future as there are certain sectors such as engineering, construction, where the number of unfilled workplaces is rising and the Hungarian wages continue to be lower than its regional competitors, noted KBC Market Research.

The rapid pace of rises in wages implies that the domestic consumption might rise by about 5 percent in 2016 and thus it might be the main and the biggest contributor to 2016’s GDP growth. Furthermore, the domestic pressure on inflation is also rising. Thus the imported inflation maintains Hungary’s consumer price index at low level, according to KBC Market Research. However, the inflation might rise to about 2 percent by the end of this year.

In spite of the rise in wage dynamic, the National Bank of Hungary might continue with its communication stance. This signifies that the inflation target rate might be reached only in mid-2018 and thus no raise in interest rate is expected in the next 18 months, stated KBC Market Research.