September was the first month when the real average wages fell in Hungary. That is because of the skyrocketing inflation, which salaries cannot follow, so the money the employees work for is worth less every single day. Furthermore, the companies need to deal with a worsening business environment, so they cannot raise wages. In the next few months, inflation will be higher resulting in a significant fall in income purchasing power.
Portfolio.hu writes that in early 2022, the inflation was only 7-8 percent while salaries grew by 15-16 percent. Therefore, the purchasing power of the employees increased. That helped consumption growth and favourably contributed to Hungary’s GDP growth.
However, that balance shifted by autumn and inflation preceded salary increases. In August, the average inflation rate reached a salary increase. Portfolio.hu believes that by the end of the summer, most employees could not buy more from their increasing salaries because the rising inflation devoured the purchasing power of their money.
The first month when people could experience their salaries were worth less was September. Average inflation was up from 15 percent to 20 percent, which means a more than 3 percent decrease in the employees’ real wages.
Since experts believe inflation will continue to increase in the next few months, people will experience the purchasing power of their salaries falling steeply. Contrary to early 2022, the companies will not be able to help them because of the soaring energy prices.
Assuming that the inflation will peak at 22-23 percent in December, real wages will decrease by 5 percent in the private sector. That rate will be 7 percent in the public sector in December. However, experts cannot exclude a 25 percent high inflation rate by the end of this year.
We can already experience the first signs of that unfavourable change in the retail sector since people started to reduce their consumption in August. That trend may result in a deepening recession in Hungary.
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