Consumers Remain Cautious Despite Rising Wages
Analysts are projecting a moderate expansion in the economy of around 1.5 percent this year, accompanied by a substantial increase in real wages by 9 percent. Despite the minimal rise in prices of non-essential items, consumers are displaying caution by delaying their purchases.
In August, the high base effect prompted expectations of a decline in inflation from the previous month, and disinflation is anticipated to persist in September. However, there could be a resurgence in annual inflation by the year-end, primarily driven by a low base effect, as indicated by Márta Balog-Béki, a senior analyst at MBH Analysis Center.
Balog-Béki emphasized the significance of escalating real wages to stimulate consumption recovery. The latest data demonstrates a robust growth in real wages, with gross wages climbing by 13.3 percent and real earnings surging by 9.3 percent in June. A consistent annual real wage growth of about 10 percent since the beginning of the year sets a favorable foundation for an expansion in retail sales.
Households are still adjusting to higher inflation levels, needing time to align their reference prices with current market rates. Economic patterns in Hungary reveal a shift in household consumption habits post-recent crises, with a notable shift towards services over retail trade. Despite improvements in income, consumers continue to exhibit prudence by delaying purchases of non-essential goods.
Economists at Makronóm Institute forecast a growth rate of 1.8 percent this year, while MBH analysts anticipate a more conservative figure of 1.5 percent. Consumption-driven growth suggests a potential economic expansion close to 4 percent next year.
Amidst these economic fluctuations, the role of real wages in shaping consumer behavior remains pivotal, with hopes pinned on its continued growth to bolster domestic consumption.
