Economy 11 June 2025, 10:18am

Hungarian retail sector lobby speaks out after May inflation data

Portfolio

In May, prices moved up again and inflation accelerated against expectations. According to the retail sector, the food price rises are not caused by them, but by pressure from suppliers. The National Trade Association (OKSZ) says there is no cross-pricing and stresses the role of competition.

Annual inflation in Hungary was 4.4% in May, the Hungarian Central Statistical Office (KSH) reported on Wednesday morning. The fresh data came as something of a surprise, as analysts had expected the price index to remain at the 4.2% level of April. The increase was mainly due to a renewed rise in food prices, which picked up again after stalling in April, despite the price-gap freeze. On a positive note, core inflation, which is more in line with more persistent price trends, fell slightly to 4.8% from 5%.

Reacting to the 0.6% monthly increase in food prices, the National Trade Association (OKSZ) pointed out that there has been no price increase in the product areas covered by the price freeze since the end of April, and in many cases even a decrease was observed. The association said this clearly shows that:

retailers have not passed on the losses caused by the price freeze to other products, i.e. cross-pricing has not occurred;
retailers were able to maintain the previously fixed, more favourable supplier prices until the end of May;
price increases continue even if retail margins are fixed in the most traded product groups.

According to the OKSZ, the price increase is not the fault of retail sector stakeholders: there is fierce competition in the sector, which is actually pushing prices down, as chains are constantly competing with their suppliers and trying to lure customers with promotions worth billions of forints every month.

The association believes that state interference, such as maintaining a margin squeeze, is preventing this healthy and consumer-friendly market competition.

Moreover, the failure to phase out the margin freeze in May increases the risk that suppliers will try to enforce their previously delayed price increases, which could further complicate the situation for shops and limit the scope for discounts.

Inflation has accelerated again

The government has introduced a range of price measures to curb inflation, one of the most prominent of which has been a price-gap freeze. In April, food prices did fall as a result, with the average price of the total food basket down by 1.3%, according to the KSH. But in May the trend reversed, with the statistics office again recording an increase - of 0.6% on a month-on-month basis.

The increase was mainly linked to seasonal food: the price of potatoes, fresh fruit and vegetables rose by 1.6% on average. There were also noticeable price increases for chocolate and cocoa (2.6%), coffee (1.8%), buffets (1.2%), pork (1.0%) and flour (0.9%). However, there were products where prices fell: eggs were 2.5% lower, margarine 2.2% lower and milk 0.9% lower.

The inflation surprise was therefore mainly in those product categories not covered by the margin freeze. This is not necessarily due to cross-pricing: for example, the increase in world prices of coffee and cocoa, and the service content of buffet prices, may have contributed to the developments.

Monthly increases in food prices have led to an acceleration in annual inflation from 5.4% to 5.9%. The rise in prices of pleasure goods is also impressive: wine, for example, is 9.3% more expensive than a year earlier, while tobacco products are 7.9% more expensive than a year earlier - the latter may be due to the impact of the excise tax increase at the beginning of the year. However, there is still no strong price pressure in consumer durables and clothing.