Assessment: Corporation revenue in concentration in CEE inflation fight

  • Increase in CEE gross operating surplus outpaces EU typical
  • January details essential to evaluating companies’ pricing electricity
  • Worst of economic downturn may possibly have now handed

BUDAPEST/WARSAW, Jan 31 (Reuters) – Even as hopes develop that central European economies can stay away from all-out stagflation, the region’s central bankers have their eyes on two opportunity foes in their battle against inflation: corporate earnings and indexation.

A fall in fuel prices indicates the region could temperature a winter season downturn with confined hit to output – very good for economic progress but possibly a new set off for inflation amounts already in some scenarios double individuals in the economies of the euro space.

As a drop in real wages spills above from the Czech Republic into Poland and Hungary, the query is how daring organizations will be in the start out-of-yr re-pricing of merchandise and solutions that presently saw hefty mark-ups very last yr.

“Our calculations show that value hikes exceeded value rises in a number of sectors,” Hungarian central financial institution Deputy Governor Barnabas Virag claimed last week soon after the bank still left its foundation rate unchanged at 13%, the best benchmark in the EU.

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“We believe this has contributed to last year’s fast rise in inflation,” he explained.

The newest Eurostat info from the third quarter displays gross running surplus in the corporate sector – a evaluate of write-up-wages revenue – growing by an annual 34% in Hungary, 22% in Poland and 16% in the Czech Republic. That is far previously mentioned progress fees of 10% the European Union as a entire and just 8% for the euro zone.

Whilst Spain’s still left-wing govt is on the look at for any extra earnings created by supermarkets and many others, and authorities in Portugal have also seen indicators of growing income, it has not showcased strongly in European Central Bank deliberations.

A equivalent discussion in the United States final 12 months, the place report company revenue led to issues as to whether organizations have been fuelling inflation in their quest to re-construct income margins, has also died down.

In central European economies like Hungary, nonetheless, economists see a probability that corporations will seize on the reality that nominal wages are growing at a double-digit percentage price, albeit even now powering headline inflation.

“The pricing energy of corporations can prevail for lengthier if they experience no drastic collapse in paying for electric power,” ING economist Peter Virovacz explained. “While the transform in authentic wages more than the class of the yr could be detrimental, this can be significantly smaller than we experienced anticipated earlier.”


The net economical consequence of the Polish company sector rose to history highs in nominal phrases in the second quarter, as advancement in profits revenue outpaced the expenses of products bought, the Polish central lender mentioned in its November inflation report.

“This signifies that organizations passed on the sharp raises in fees, which include all those similar to higher selling prices of organic gasoline and electric power, to the selling prices of ultimate merchandise,” it reported.

“Consequently, profitability indicators, including the percentage of rewarding companies, remained substantial.”

Prime Minister Mateusz Morawiecki has identified as on point out-owned railway firms to slice intercity ticket prices just after hikes of concerning 11.8% and 17.8% this 12 months, producing air vacation a less costly alternative than taking some trains amongst Poland’s major cities.

The Czech National Lender said in its autumn financial plan report that sole traders have been in a position to deliver bigger-than-usual genuine income centered on its latest figures, although details on the premier 2,000 Czech companies showed the earnings charge in all sectors was at the very least equivalent to the pre-pandemic degree.

The income fees in important sectors of the financial system – trade, transport and restaurant companies – were being raising, it extra.

Czech central financial institution Vice Governor Eva Zamrazilova has reported company margins are a person region to watch for possible price tag potential risks, incorporating on the other hand that current developments confirmed customers were getting to be increasingly sensitive to significant rates.

“That is a further factor that I will watch closely, and if some thing that can be called a gain-inflationary spiral is preserved listed here, then for me it will be a move to intervene,” mentioned Zamrazilova.

Economists at Komercni Banka stated the 3rd-quarter income amount of Czech non-economical enterprises was the best given that the first 50 percent of 2021. Nevertheless, declining need could make it increasingly challenging for corporations to increase charges, they claimed.


The Hungarian Competitors Business has released a probe into a sharp maximize in foods costs, which rose by an annual 49.6% in Hungary in December, by far the best in the EU.

Hungarian food rate growth moved broadly in line with regional and EU levels until finally the begin of 2022 but gathered speed from May perhaps, when the forint decoupled from central European currencies and weakened significantly towards the euro.

Some telecommunications businesses in Hungary have also raised companies rates in reaction to superior inflation, with Deutsche Telekom’s community unit matching past year’s 14.5% inflation fee across its shopper solutions contracts.

“We do not consider it ideal that providers are not location their prices based on their expense construction but mechanically monitor previous year’s inflation rate,” Hungarian central bank Director Andras Balatoni advised Reuters. “We are monitoring developments.”

Extra reporting Jan Lopatka in Prague
Creating by Gergely Szakacs
Editing by Mark John and Christina Fincher

Our Standards: The Thomson Reuters Have confidence in Ideas.


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