Hungary Wage Growth Ticks Up Slightly In June

Gross wages in Hungary rose by 9.7% year on year in June, up from 9.6% in May, according to data out today from the Central Statistics Office (KSH). The closely watched bonus-adjusted net wage growth in the private sector accelerated to 8.9% from 7.4% in May. This number is thought to be significant since the central bank regards this as a key trend indicator. The number of public sector employees - though up slightly from the lows hit in the earlier months of 2008 - still continues its annual decline - falling by 4% in June, following a 4.5% y-o-y drop in May.



Real wage in January-June was up 0.5% yr/yr based on a consumer price index of 6.8%, this compares with a 0.3% growth rate over the Jan-May period. Gross wages were up 8.2% yr/yr and net wages increased by 7.3% yr/yr in the first half of the year in the whole economy.

Gross monthly wage in the private sector grew by 8.7% yr/yr in June, up from 8.4% in May, while the increase in the public sector was up 12.7%, down a little from May's 13%. Net wages in the private sector rose by 7.5% yr/yr in June, up from the 7.3% recorded in May, while public sector wage growth dropped fractionally to 10.9% from 11%. In inflation pressure terms it is not good news that the ex-bonus wage increase in the private sector rose to 8.9% yr/yr in June after the 7.4% recorded in May. May's number had been the lowest rise in the past two years.

The number employed in the Hungarian economy dropped by 0.9% yr/yr in June, following a 0.2% fall in May. Employment was down by 0.4% in the private sector and by 4% in the public sector. There are now over 100,000 fewer employees in the private sector than in June 2003.


A number of factors are thought to have been behind the rise in ex-bonus private sector wages, some of them "one off" factors like the lower number of working days in May. A breakdown of the details reveals that the acceleration was to some extent driven by increases in the financial sector (up by 14.8%y-o-y from 4.9%y-o-y) in May. Also according to the Statistics Office the significant increase in the headline figure was due to higher bonus payments in June at several "large financial institutions."

Despite the concerns raised by today's data I continue to expect that the NBH will keep rates on hold at the August meeting.