Long-time gap between real wages and retail sales growth closed in January

HUNGARY - In Brief 31 Mar 2025 by Istvan Racz

---

For quite a while, but at least throughout the whole of 2024, government speakers and all sorts of analysts have been complaining about the weakness of consumption growth, in comparison with the expansion of real wages. Problem solved, one could say when looking at the January data (yoy changes in %, in real terms, source: KSH): Well, yes, this was more because of the decreasing momentum of real wages rather than of more robust consumption. But honestly, 4.6% yoy real wage growth among full-time employees is still quite something in an economy which is growing just marginally in real GDP terms. It is also interesting to look at how that recent slowdown of real wage growth took place (yoy changes in %, wages in nominal terms, source: KSH): The important observation seems to be that it happened both because of rising inflation and of sharply decelerating nominal wage growth (10.4% in January), but much more because of the latter. We have been warning about this for a while: given the poor showing of profits last year, enterprises may be tempted to scale back their plans to increase employee remunerations in 2025. Some analysts are trying to persuade their audience that whatever nominal wage growth one sees in January is likely to remain typical for the whole year, but that is not true: in 2024, for instance, the year started with 14.6% yoy nominal wage growth in January, but it ended with only 11% yoy in December. OK, the government's budget forecast for this year included 8.7% average nominal wage growth only, but there is still considerable risk that any further strengthening by consumer demand growth may be jeopardised by a decelerating rate of nominal wage growth and...