Hungary wage growth ticks up, rates seen on hold - extended

Gross average wages grew by an annual 9.7% in June, picking up from 9.6% in May when there were two fewer working days than in the same period a year earlier, the Central Statistics Office (KSH) said.

In April, gross wages grew by 10.6%. Gross wage growth in the private sector accelerated to 8.7% from 8.5 while public sector wages grew by 12.7% after a 13.0% rise a month earlier, the KSH said. Ex-bonus private sector gross wages, a number watched closely by the central bank when setting interest rates, grew by 8.9% year-on-year after a 7.4% increase in May.

KSH statistician Erika Molnárfi said the acceleration in wage growth was mainly caused by a difference in working days. “This is not really an acceleration (in the ex-bonus private sector wages), last month there was an apparent decline due to fewer working days, so what we see now matches the broader process for the full year so far,” she said.

RATES SEEN ON HOLD

Analysts said the wage figures were hard to interpret and central bank (NBH) rate setters would use them with caution in their decisions, particularly as other data like employment show continued weak performance in industries. The past months’ wage trends confirm gross wages in the economy are growing at a steady rate around 10% while private sector wages stay around 9%, analysts said.

The number of employed fell by 0.9% in annual terms in June after a 0.2% decline in May, the KSH said. That indicates an economic slowdown in Europe is taking its toll of Hungary’s industrial output growth, analysts said. “This supports the view that wage growth will be moderating in the next 12 months, even though recent data were basically flat,” said Zsolt Kondrát at MKB in Budapest. “The figures will do nothing to change the central bank’s attitude, thus I expect rates to be left on hold in August,” he added.

The MNB’s Monetary Council is widely expected to keep its base rate unchanged at 8.5% at its monthly rate-setting meeting on Monday. Earlier this year the bank hiked interest rates by a total of 100 basis points, citing inflation concerns partly triggered by rising wages, but most analysts say its next move will likely be a cut around the end of the year. (Reuters)