Wage growth was much stronger in June than official data suggested at first glance

HUNGARY - In Brief 31 Aug 2021 by Istvan Racz

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Nominal wage growth on a per employee basis was reported by KSH at only 3.5% yoy in June, implying -1.7% yoy for the real-terms number. This was kind of perplexing at first glance, for being unusually low compared to any previous numbers: in H1 total, wage growth was 8.3% yoy nominal and 4% yoy real, and the two-year growth rate, to look back further beyond last year's Covid adjustment, was 19.1% in nominal terms and 10.6% in real terms.But that is only because the June yoy growth number was depressed by a big one-off base effect item, the payment of a HUF500k extraordinary bonus to health care workers in the same month of last year. Because of the latter, nominal wages fell by 4% yoy in the government sector, whereas they still rose by 6.4% yoy in the enterprise sector.Nominal net (after tax) wage growth and CPI-inflationNote: Yoy, in %, Source: KSHGraphically, this June's collapse of the blue line in the chart above was an outright counterpart of last June's big spike. Adjusted for the health care bonus of last year, this June's wage growth data would largely fit with the trend, which is a series of high but slowly descending yoy growth rates. Given the pressure put on profit margins by the consolidation of the forint against the euro, this trend is likely to be sustained in the forthcoming period, until the government carries out its existing plan of raising the statutory minimum wages by a big amount at the outset of next year, keeping an eye on the April election. This latter would push up the wage growth curve once again, just as it happened a few years ago (see the foregoing chart again). Anyway, it would be a nice example of how government and central bank poli...