The 14% salary increase in February still reflects the events of the previous year, indicating a slowdown in wage dynamics, said the analyst from ING, commenting on the recent wage data from the Hungarian Central Statistical Office (KSH). This change is expected to prevent a wage-price spiral. The sectors showing above-average growth include construction, while in the public sector, teacher salaries contributed significantly to the uplift.

Peter Virovácz, an analyst at ING, assessed the KSH’s recent earnings data stating that the pace of annual wage increase slowed further in February. Despite the 14% increase being considered quite high, it: "still reflects much more the economic processes of 2023 than the events of this year."

He noted that many companies now follow a wage cycle from spring to spring (hence salaries are increased in March-April rather than in January), indicating that the February data incorporate the high salary increases intended to compensate for the extreme inflationary environment of 2023.

Meanwhile, the continuous slowdown in wage dynamics suggests that: "where salaries have already been adjusted, they could have been significantly lower than last year."

This was partly anticipated by the 10% increase in the guaranteed minimum wage for a larger group of employees.

According to a survey referring to the wage expectations for 2024 by Randstad, while 91% of employees hope for at least an 11% wage increase, only 63% of employers plan to implement up to an 11% salary hike. Based on these, it is expected that the general pace of wage increases and real wage growth may significantly slow down in the coming months, reducing concerns over a potential wage-price spiral.

Detailed data reveal that: "in the public sector, the wage growth dynamics in February (17.2%) was above average, primarily due to heightened wage outflows in education."

In the corporate sector, the pace of wage growth has slowed in many areas, settling at an average of 12.8%. However, certain sectors, like construction, witnessed unexpectedly brisk wage increases despite gloomy growth outlooks. Although in the service sector many areas experienced below-average wage hikes, there was a slight acceleration observed from January to February. It's also worth noting that the gap between the average and median wage continues to narrow, potentially reflecting the impact of minimum wage increases and possibly indicating that sectors with previously higher wages are experiencing below-average wage growth. Here, companies seem to be trying to keep a lid on wage costs.

Given that inflation slowed in February but the pace of average salary growth decelerated more significantly, the annualized real wage growth dipped below 10%.

"Looking ahead for the rest of the year, the purchasing power of wages could further erode."

This is due to an expected slowdown in wage outflows and potential inflation strengthening. The Hungarian National Bank (MNB), during its April rate-setting meeting, also highlighted this concern. The bank anticipates a real wage growth of around 6% for the entirety of 2024, roughly aligning with ING Bank's own expectations. Averages of around 10% wage growth with an inflation rate of 4.5% are forecasted.