Consumption Growth Will Have to Wait, Market Analysts Warn


This issue of HR Matters will focus mainly on Hungarian households’ earnings and spending, given that the highest outgoings are in December, for obvious reasons. In this analysis, several polls conducted by the GKI Economic Research Co will offer relevant data as a starting point.

For three months in a row, the inflation rate has been falling. What is more, the target set by the government to reach a single-digit number by December, has been achieved (the figure had dropped to 7.9% in November), albeit Hungary still has the highest rate in Europe.

It would seem that the population is focused on the latter part of the statement, that inflation is high, rather than the actual number. A study released on Nov. 17 by GKI looked at the September inflation of 12.2%, which, based on a survey of 1,000 households, was perceived as actually being at 32.8%. No reasonable salary raise could counterbalance such a perceived depreciation, GKI notes.

“The increase in net earnings slightly above inflation (14% in the first eight months of 2023) was also felt to be insufficient (as their real earnings decreased even with this), and the former might affect the bank deposit and government securities markets (the investment volume decreased/stagnated with the given yields),” it said.

Earnings, however, show significant differences regionally and based on education level. While this is probably not surprising, the level of discrepancy certainly is. The GKI study released on Nov. 28 shows that, in Budapest, the average monthly net income is HUF 370,000, compared to HUF 243,000 in villages.

Between counties, the difference can amount to 42%, as seen in the case of Pest and Szabolcs-Szatmár-Bereg. Among other factors (industry, tourism, etc.), the high income in a county is also fueled by the proportion of university graduates working in the area.

“The largest proportion of graduates live in the capital (especially on the Buda side: 57.4%), but their weight is high in the Pest county, the big cities and their surroundings, and around Lake Balaton,” GKI notes.

Tamás Fehér, Manpower director for Hungary, Croatia and Slovenia.

Graduate Salaries

How does that impact the wealth of a county?  The salary of graduates exceeds that of skilled workers by 38–95%, depending on whether it is a college or university degree, and the proportion of graduates explains 61% of the differences in earnings between settlements, GKI says.

Consumer confidence seemed healthy, albeit slightly lower in November than in October, which saw the highest measure in the last 18 months, as presented in the latest GKI economic sentiment chart. A more dramatic situation is reflected in another survey by Intrum.

“Hungarian consumers are in a more difficult situation than ever before in previous years. Many of them see the future as hopeless, as their current income does not cover everyday expenses,” says Intrum, which describes itself as Europe’s undisputed market-leading credit management services company.

The company says that Hungarians are looking to save on everything possible, including meals and Christmas presents. But this is not a Hungarian specificity; it is found across Europe, as reflected in Intrum’s European Consumer Payment Report 2023, released on Dec. 5.

Based on data gathered in September in 20 European countries, 20% of consumers have no savings, while in Hungary, almost one-third of the respondents, 31%, said they have no emergency funds. One-third of Hungarians also said that they had paid at least one utility bill after the due date, indicating as a reason for doing so a lack of money (52%) or simply forgetting the due date (36%).

Intrum, in cooperation with GKI, also regularly releases a household solvency index, IFI. For three quarters in a row, the IFI has grown in Hungary, from 6.51 in Q1 to 11.6 in Q2 and 12.99 in Q3. While there is growth compared to previous quarters, the Q3 index is still at its lowest in the last 10 years. But why, if the inflation has been getting continuously lower each month?

Judit Üveges, sales director at Intrum, explains: The monthly inflation is only one figure, but prices for different products grow at different rates. Rises in food and utility prices impact families with low incomes the most.

Consumption Data

“This is also seen in consumption data: while high-income families can even increase their consumption, pensioners, employees in the state administration, and those living on a minimum wage must significantly lower their consumption,” Üveges says.

The good news, at least based on the GKI economic sentiment report, is that businesses’ willingness to employ improved slightly in November compared with the previous month, with the proportion planning to lay off and increase their workforce almost equal. Pessimists are in the majority in the construction sector, while optimists dominate the services sector. In industry and retail trade, the two proportions are essentially equal.

The public’s fear of unemployment has risen somewhat compared to October, GKI noted. However, the employment outlook is not so bad. According to a forecast released on Dec. 12 by staffing company Manpower Hungary, 31% of employers plan to hire in Q1 2024, with 21% eyeing layoffs.

In the first quarter, it is mainly employers in the IT, finance, and real estate sectors that are preparing to expand their labor force. Workers skilled in communication services, logistics, and the automotive industry also have higher chances of new jobs in Q1. Companies in the consumer products and services sector are planning minimal or zero labor force expansion.

This indicates that “players are aware that, after the significant backdrop this year, private consumption will return at a slow pace to previous levels,” said Tamás Fehér, Manpower director for Hungary, Croatia and Slovenia.

This article was first published in the Budapest Business Journal print issue of December 15, 2023.

Latvian Producer Deflation Eases Further in June Figures

Latvian Producer Deflation Eases Further in June

Hungary to Table EU Competitiveness Pact EU

Hungary to Table EU Competitiveness Pact

Ganzair, Szeged U Partner on Green Hydrogen Electrolyzer Science

Ganzair, Szeged U Partner on Green Hydrogen Electrolyzer

CATL Debrecen Becomes Sponsor of Campus Festival In Hungary

CATL Debrecen Becomes Sponsor of Campus Festival


Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.