A scary net wages figure was reported for February

HUNGARY - In Brief 26 Apr 2023 by Istvan Racz

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The net (after-tax) wages of full-time employees rose by 0.8% yoy in nominal terms in February. This implies a 19.6% yoy drop by real net wages. Yes, indeed, real wages fell by one-fifth compared to February 2022. For the first two months of this year, the corresponding figures were 7.9% yoy growth by nominal wages, and a 14% yoy decrease of real wages. Here is the real net wages growth chart, compared with retail sales growth: Source: KSH This is so scary at first glance that it requires a potent tranquilizer pill or at least some explanation. As for the latter, we all remember that last year was an election year, and February was the month when most of Fidesz' extraordinary campaign gifts, including the refund of a full year's income tax to families with children and some generous extras granted to old-age pensioners were paid out. A further element on the gift list was a 6-month worth of extraordinary payout to armed services (soldiers, policemen, etc.), also implemented in February. Excluding this item from the basis, net wages would have risen by 15.2% yoy in nominal terms and fallen by 8.1% yoy in real terms in February alone. The corresponding January figures were +16.1% yoy in nominal terms and -7.6% yoy in real terms. For sure, an intriguing question is how retail sales will react to this negative development. Well, the response to last year's generous handouts was double-digit yoy growth figures in real terms in March, April and May, following a trend of gradual normalisation. In essence, something like the reversal of this may be expected in the coming few months, as there were no extra handouts of any similar size early this year. More accurately, there was...