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By Gergely Szakacs

BUDAPEST / BUCHAREST (Reuters) – Matei Susnea has roamed the icy streets of Bucharest in search of a Christmas tree he can afford, but with the prices of everyday items soaring, he fears he and his family won’t have to do without it this year.

Like millions of others, the 42-year-old Romanian construction worker is feeling the effects of rising inflation that escalates and accelerates across central and eastern Europe as a result of chain friction supply, tight labor markets and upward pressure on wages.

On average, commodity prices in the region are rising at their fastest in at least a decade, up about 7% from a year ago and in some cases much more. In the Romanian capital, Christmas trees are 20-30% more expensive.

“100 lei (almost $ 23) is too much for me now. Finding a good tree this year seems less and less likely, ”said Susnea, father of two. “The prices of everything have gone up very quickly. “

Central banks in the region, which since June have led the way in the European Union by raising interest rates, appear convinced that a debilitating price spiral can still be avoided.

But, proof of what economists and central bankers call second-round inflationary effects, wages are already gradually increasing and employers and consumers alike are beginning to adjust their behavior.

“The official line is that many of the factors driving inflation are transient, but… if inflationary trends take hold, it will become a self-fulfilling process and I fear we are already in this cycle.” said Sandor Baja, managing director of recruitment firm Randstad in Hungary.

“I think employers will definitely have to increase average double-digit wages next year. This is (also) due to the labor market situation. “

In the Czech Republic, a fifth of workers are ready to change jobs if their wages do not rise in line with prices, according to a November survey by the STEM / MARK agency. Meanwhile, more than half of industrial companies will raise prices by more than 5% next year, according to an October survey of trade alliances.

BIG EXPENDITURE BUDGETS?

The latest data puts inflation at around 7% in the region, and at its highest level in two decades in Poland, 13-year highs in the Czech Republic and Romania and a 14-year high in Hungary.

Central bank projections show inflation is on track to average nearly 6% in these four countries next year, the region’s highest average since the 2008 financial crisis.

Capital Economics analyst James Reilly predicts that underlying price pressures will keep Eastern Europe numbers high until 2023, with food alone adding a percentage point additional in 2022.

Further rate hikes will have a dampening effect, he said, but large spending budgets, especially in Poland and Hungary, could add further pressure.

Economists say tax cuts on petrol, gas and electricity announced by the Polish government will reduce the peak of inflation in early 2022, but a policy of distributing money to households could lead to an increase inflation later in the year.

For some Polish buyers, the price change is already marked.

“It is especially visible in the daily races. Vegetables, fruits and other everyday products. When it comes to gifts, people usually budget in advance, ”said Izabela Sarnocinska, a Warsaw resident.

“When I go to the store and buy what I usually buy, instead of 150 zlotys, I now pay 200 zlotys. “

INFLATION CASCADE

In Hungary – where Prime Minister Viktor Orban, facing stiff competition for re-election next year, has raised the minimum wage by almost 20% – the central bank has acknowledged that inflation is spilling over into prices of the energy and fuel on processed products.

Food for Life, a charity that provides free meals to over 13,000 poor Hungarians, has been forced to narrow the product line in its food donations to a dozen or so items from around 22 in previous years , skipping more expensive items because the prices “are outrageous.” », Declared its leader Attila Szanyi-Karl, wrapping up the donations.

Meanwhile, a Hungarian building materials association reported price hikes of 10-20% due to rising energy and transportation costs.

In a Budapest market, some say they now spend around 100,000 forints ($ 310) per month, or about two-thirds of the average pension, on food alone.

“I haven’t calculated exactly how much more everything costs,” said Zsoka, 62, who declined to give her last name. “All I know is I can afford a lot less than before for the same amount of money.”

($ 1 = 322.67 forints)

($ 1 = 4.3907 lei)

(Additional reporting by Krisztina Fenyo, Robert Muller in Prague, Radu Marinas in Bucharest and Felix Hoske in Warsaw; Additional reporting by Robert Muller in Prague and Radu Marinas in Bucharest; editing by John Stonestreet)