Hungary takes aim at ‘shrinkflation’ with mandatory price warnings

Hungary takes aim at ‘shrinkflation’ with mandatory price warnings

BUDAPEST (Reuters) – Hungary’s government will require large food retailers from March to display price warnings on products that have shrunk in size, the Economy Ministry said on Monday.

Hungary’s inflation rate peaked at 25% in the first quarter of last year, the highest in the European Union, and it is struggling to revive the economy as consumers’ purchasing power has declined.

Data published on Monday showed retail sales rising by 0.8% from the previous month in November, though they were still down by an annual 8.7% in the first 11 months as consumption fell.

Prime Minister Viktor Orban’s government is looking to revive the economy, which eked out its first quarterly growth in a year in the third quarter, with local government and European Parliament elections on the horizon.

“In the past months, the phenomenon where the size of certain products shrinks while their prices remain the same or even increase has attracted heightened attention in several countries,” the Economy Ministry said.

“This deceptive practice leads to consumers getting less of the purchased product for their money,” it said.

Under new rules from March that will be in effect for two months, food retailers with an annual turnover above 1 billion forints ($2.9 million) will be required to display price warnings for products that have shrunk in size compared to the period between Jan. 1, 2020 and July 1, 2023.

Food makers, importers and suppliers will also be required to notify retailers of any size reductions.

“Although we believe that households will initially focus on deleveraging and rebuilding their reserves, consumption could also start to grow,” economists at ING said about the latest retail sales figures.

“However, for this change to be significant and lasting, consumer confidence must first be restored, which is a more protracted process.”

($1 = 344.46 forints)

(Reporting by Gergely Szakacs; Editing by Ros Russell)