Hungary: Wage growth re-accelerates

Wage growth in Hungary rebounded in May after a weak month. This is due to a new round of wage settlements in the public sector, while a labour shortage is forcing businesses to raise salaries

11.2%

Average gross wages YoY

Consensus 10.0% / Previous 9.0%

Better than expected

Hungarian average gross and net wage growth accelerated to 11.2% YoY in May, so rebounded into the double-digit territory after missing a beat in April. As we expected, the new wage settlement in the public sector helped a lot. Wage growth in the public sector came in at 10.7% YoY in May, compared to the 3.6% YoY rate measured in April. In the meantime, businesses are still leading the ‘salary-race’, posting an 11.2% yearly wage growth.

Wage dynamics (3-month moving average, % YoY)

These strong wage growth numbers aren't just reserved for the the business sector. From energy through to agriculture, construction to manufacturing, every primary and secondary sectors of activity showed above-average wage growth. In services, the financial sector is leading the pack with a 14% increase in market services, while in the public sector, public administration and defence workers got a 15.4% YoY wage increase on average.

These wage dynamics are set to remain strong for the rest of the year, posting a 10% year-on-year increase on average. At the same time, the most important question for us is how much of this additional income will actually be spent? Households are seeing a lot of news about an impending external crisis and they're also seeing favourable savings opportunities in retail bonds.