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The consensus among analysts is that the economy could expand by around 1.5 percent this year, while real wages could rise by 9 percent. Consumer caution is mainly reflected in the postponement of purchases of non-essential goods, even though these items have hardly increased in price at all.
In August, the high base had led to expectations of a decline in inflation from July’s level, and disinflation could continue in September, also as a result. However, annual inflation could rise again by the end of the year, mainly due to the expected low base, Márta Balog-Béki, senior analyst at MBH Analysis Center, told Magyar Nemzet.
The expert said that with lower inflation, household consumption could pick up, but there is still caution on the part of the population.
She stressed that
rising real wages are essential for consumption to recover.
Real wage growth continues to be strong, with the latest data showing a moderation in the pace of wage growth in June, with gross wages rising by 13.3 percent, while real earnings increased by 9.3 percent, against a 3.7 percent year-on-year increase in consumer prices. Annual real wage growth of around 10 percent per month since the start of the year and real wage growth expected to hold steady throughout the year provide a good basis for retail sales to expand, but this will require a further easing of the cautionary motive, she said.
Dániel Molnár, chief economist at the Makronóm Institute, said surveys suggest that households still perceive higher inflation, and they need time to adjust to higher prices, including adjusting the reference prices they use for purchases to current prices.
Economic data show that in Hungary, too, household consumption patterns have changed after the recent crises, with an increased role for services, while, for instance, retail trade is less affected by the improvement in income.
However, the existence of a cautionary motive is also reflected in the slower growth in purchases of non-essential items, which consumers are still postponing.
Makronóm expects growth of 1.8 percent this year, while MBH analysts forecast 1.5 percent. Based on consumption growth, economic growth next year could be close to 4 percent.
Via Magyar Nemzet, Featured image: Pixabay
