GDP somewhat stronger than expected in Q1, real wage growth very high in February

HUNGARY - In Brief 30 Apr 2024 by Istvan Racz

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GDP grew by 0.8% qoq, 1.7% yoy on seasonally and calendar-adjusted basis in Q1, according to KSH's first estimate. Both figures represent material strengthening from Q4's upwardly revised 0% qoq, 0.5% yoy growth data. However, all this was only a moderate surprise: analysts, including us, expected 0.5% qoq growth, which proved to be quite accurate, considering that this time around, GDP was reported earlier than industrial output and retail sales for March. But anyway, the new data is quite positive, as it supports the predominant expectation that annual GDP growth is likely to reach 2-3% this year. Our standing 2% growth forecast may seem a bit too conservative, but we would refrain from raising that until some more detail has become known on the Q1 national accounts. At this point we only know that GDP grew by 1.1% yoy by the unadjusted data, and it was calendar adjustment that raised this number to the above-mentioned 1.7% yoy. The latter may sound counterintuitive, as the leap year worked the other way round this year, but the number of working days was still less in Q1 2024 than one year ago. Real GDP growth Note: In percent; Source: KSH The other data release to be mentioned here was a 13.8% yoy increase by nominal net (after-tax) wages in February, which translated to 9.7% yoy growth in real terms. The latter followed a 10.4% yoy real wages growth figure in January. This appears to be the main reason why essentially all analysts believe that inflation will rise in the rest of this year, from the 3.6% yoy level reported for March. For sure, wage growth appears somewhat stronger than expected, which should be eventually beneficial for our GDP growth forecast as we...