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Wednesday, March 19, 2008

Hungary Wages and Salaries January 2008

Hungary's monthly average gross wages dropped by 1.5% year on year in January, according to data from the Central Statistics Office (KSH) this morning. At the same time net wages were down by 0.2% year on year in January.

As a result real wages - derived by subtracting the annual inflation rate - declined by 6.8% year on year in January, following the 7.1% increase of in the consumer price index.

Given the existence of a high-inflation environment in Hungary there has been no yearon year decline in gross wages, possibly since the time of the regime change, so as Portfolio Hungary note there may well be some one-off impact at work in the background.

And indeed there is, since the KSH note that for the first time January wages in the public sector do not contain the entire 13th month bonus payout, only its monthly proportionate share, as this bonus is now being distributed fractionally, and indeed it has been paid some monthly instalments wrere already paid last year. According to the statistics office, they paid four of the 13th monthly wage bonuses last year and the remaining eight will be paid as of January this year. So that explains the dramatic nature of the change, but it doesn't entirely get us out of the woods, since the presence of these pre-paid installments in Sept to December help explain why there was some easing up (the hump you can see in the chart above) in the rate of wage deflation in the last quarter of 2007. But the underlying trend is still one of very strong wage deflation, which is why we shouldn't be at all optimistic about any sudden improvement in comestic consumption in the coming months.

In addition, if we look at the two sectors (public and private) separately, we can see that the situation is even more complicated (see chart) since while the public sector is in strong depression (both in terms of wages and employment) the wages are moving in the other direction in the private sector, even as employment in January is up slightly over December, and was in fact the best month since August last year.

On the employemnt side, the number employed in the whole economy dropped by 2.0% year on year to 2,724,600 in January, versus -2.3% in December. There were 1,933,500 people employed in the private sector marking a 1.0% yr/yr decline in the first month of the year, while the headcount in the public sector was down 5.8% year on year in January to 710,200, which compares with a 6.4% fall in December.

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