Hungarians expect high prices: inflationary illusions hardly change

This article is available for reading in Trade magazin 2024/12-01

In 2021 and before, Hungarians felt the inflation was 4-5 times bigger than KSH’s figure, but this level fell below being twice as big in most of 2022 and 2023. However, then again it rapidly grew to more than 7 times by 2024: while the KSH consistently reported figures below 4%, the population was putting the increase in price levels at between 20% and 30% if compared to a year earlier.

This also influences expectations: the difference between the inflation rates expected “for the next 12 months” in the past 6 years and the inflation rate “over the past 12 months” was roughly 2.4 percentage points, so people generally expected a similar outlook as before. What are the reasons of the divergence? It can be attributed to several reasons. During the period of exceptionally high inflation in Hungary, prices of basic necessities and services increased more, which affected low-income groups more, whose share among respondents increased precisely because of high inflation. The lower one’s income, the more of it is spent on subsistence (food, utilities, housing), which are traditionally price-insensitive items. All in all, although the increase of the consumer price index has slowed down considerably to below 4% according to KSH data, the population doesn’t believe this. //