ECO ECONOMY-Czech real wages fall, Hungarian retail growth slows as inflation bites

September 5 (Reuters)Czech real wages for the second quarter were down nearly 10% from a year earlier, while data also showed Hungarian retail sales growth slowed in July, giving further indications of the slowdown economy brewing in Central Europe as soaring inflation burns consumers.

Central European economies are bracing for a tough second half, which could even mean a slide into recession for some, caused by double-digit inflation rates hitting consumer demand and taking away a key driver of the recovery region’s post-pandemic.

With an average inflation of 15.8% in the Czech Republic in the second quarter, wages fell by 9.8% in real terms compared to the previous year. The nominal wage increased by 4.4%.

“It was clear that wage growth at such a pace would not be enough (to keep up with inflation),” Raiffeisen analysts said.

The decline in real wages was slightly larger than a Reuters poll predicting a 9.5% drop, but less than a central bank forecast of a 13.1% drop.

The central bank, which kept interest rates unchanged last month but did not completely shut the door on further hikes, sees real wages falling more than 12% for the whole of 2022.

While the Czechs may be at the end of a tightening cycle, the Hungarian central bank has continued to make large rate hikes to fight inflation and help the forint, which is just next to historic lows. He increased his base rate HUINT=EIC down 100 basis points to 11.75% last week.

Retail sales growth slowed in July to 4.3% year-on-year, data showed on Monday, adding to signs that the cost-of-living crisis was catching up with central European economies despite rising nominal wages.

(Reporting by Jason Hovet in Prague and Gergely Szakacs in Budapest; Editing by Bradley Perrett)

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Laura T. Thrasher