The Polish retail trade also collapsed after the Czech one, will Hungary get away with it?
Polish industrial production was not affected by the difficult economic situation and high inflation as much as retail turnover.
As a result of the high currency deterioration, the turnover of Polish stores brought a minus of 4.8 percent in December, which is particularly interesting, since the Polish prices are cheaper than Hungarian prices.
Due to the increase in Polish salaries, it has lagged behind inflation, so real wages are falling despite the increase in nominal values.
The decrease in real wages brought with it a loss of purchasing power, which has now had a spectacular impact on retail sales data.
In the Czech Republic, another large European economy, there was already a huge gap in the standard of living reflected in purchases: already on November 8 and 7, one medium traffic was smaller than one before. It is no coincidence that inflation was also the first among the region’s large economies to pass the peak.
In Poland, its sales numbers went through significant fluctuations, with a monthly decrease of 4.8 percent in December, but was closely followed by the 4.6 percent drop in April. Optimistic expectations at the end of the year were finally crushed by the arrival of the December data, the 2.6 percent increase in November was followed by a huge cold shower.
From March 2022 to the end of the year, Polish inflation remained above 10 percent, reaching a peak of 17.9 percent in October. The food price inflation measured in the country was 21.5 percent in December, and the producer price increase was around 20.4 percent at the end of the year.
Overall, productivity shows an upward trend, so the mining and construction industry turned negative towards the end of the year.
The Polish situation is particularly interesting when compared to the Hungarian situation.
The whole region was hit by the price shock
The Hungarian inflation data of over 24.5 percent in December already far exceed the growth rate of wages, the most recent data from October only report an increase of 18.1 percent. product, the rate of increase in domestic food prices reached almost 50 percent by December, and the trend suggests a further deterioration, so it is questionable whether the Hungarian retail trade can avoid a collapse similar to the Czech and Polish ones. The spike in domestic inflation at the end of the year still left real wage growth for the whole of 2022, but consumption growth had just stopped by November. Compared to the previous month, sales also decreased in Romania.
For Hungary, however, this much is certain: while the zloty has been weakening continuously since mid-December, the forint has been strengthening: the Hungarian currency’s quotation against the euro is stable below the psychological level of 400. It is particularly interesting that the zloty is also weakening against the forint, losing more than 6 percent of its value against the Hungarian currency to its seasonal peak in December. However, this did not lead to a reduction in prices, and the competition authority also began to investigate the pricing practices of commercial chains.
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The high inflation environment and the reduction of purchasing power do not mask the negative outlook for Poles, as industrial productivity, as we have seen, shows an upward trend. The economic performance in the fourth quarter was better than the experts expected, but Capital Economics predicted 0 percent GDP growth by 2023 even after this count.