Retail sales in Hungary declined by 3.9% in December following a 0.6% rise in November, as food sales plummeted, and the end of a fuel price cap led people to buy less fuel.

This latest data is another indication of economies in Central Europe enduring a steep slowdown at the end of last year due to soaring inflation impacting purchasing power, and rising wages not keeping up with price growth.

The data published on Monday showed food sales in Hungary fell by 8.3% year-on-year in December, whilst non-food sales dropped 0.4%. Fuel sales were up just 1.3%, Reuters news agency reports.

“Due to the end to the fuels price cap in early December, the volume increase at filling stations plunged,” according to the country’s statistics office. 

In November, fuel sales rose by over 27% in annual terms, which decelerated steeply the following month.

Central bank policy makers are now focusing on the likely impact on domestic demand this year, with inflation still high. Indeed, central banks in the region have opted to bring a halt to steep rate-hiking cycles introduced in 2021, on fears GDP will be depressed further.

In Hungary, with inflation over 24% in December, wage growth in the private sector hit 18.7% year-on-year in November. The government had reached an agreement with employers for a 16% hike in the minimum wage for this year, which affects wage decisions as the year gets underway.

“The decline in real incomes, rising corporate costs, delayed public investment and the stricter interest rate environment all have a restraining impact on domestic demand,” said the country’s central bank following the latest monthly rate meeting last month.