Inflation decreased, real yield increased: good news for investors

By: Trademagazin Date: 2024. 09. 10. 11:11

According to August inflation data, the pace of price increases in Hungary has been moderated, which is a positive development for both consumers and investors. According to the Central Statistical Office (KSH), the price level was only 3.4% higher in August 2024 compared to a year earlier, which represents a multi-year low. This is particularly important, as the real return (return above inflation) available to investors also improves as inflation moderates, reports Bankmonitor.hu.

Services continue to drag inflation

Although inflation generally decreased, the prices of services continued to rise by 9.5%, the most significant price increase of all categories examined. On the other hand, we experienced a price decrease in other sectors, for example in the case of consumer durables (-0.2%) and household energy (-4.3%). The increase in food prices was only 2.4%, which also contributed to the lower inflation rate.

Improving investor outlook: increasing real returns

The slowdown in inflation is particularly favorable for investors, as it increases real returns. While inflation rose above 25% at the beginning of 2023, the return on government securities was only 4.3%, which meant a serious real loss of 17%. However, the situation has improved significantly since then. In March 2024, the retrospective real yield reached 10.6%, which already created a more favorable situation for investors.

According to the August data, in addition to the nominal yield of 9.3% and inflation of 3.4%, investors in short-term government securities achieved a real yield of 5.7%. This shows that investments also increased in real terms, which is an encouraging trend for the future.