Hungary's inflation accelerates to 3.6% in September

Hungary’s inflation picked up to 3.4% yr/yr in July, a 5.5-year high, then it remained there in August, but it accelerated further in September to 3.6%. The last time the headline figure exceeded even this level was in January 2013. Analysts polled by Portfolio projected inflation at 3.5%, while the central bank’s (MNB) Report on Inflation had 3.4% pencilled in for September therefore the latest figure is a minor surprise.

Meanwhile, core inflation rose to 2.4% yr/yr from 2.2%, correcting the unexpected drop in August.

Although the headline figure approached the top of the central bank’s tolerance range even more, core inflation indicates that there is no meaningful price pressure in the Hungarian economy. We should highlight, however, that the short-based core inflation index stagnated at 3.0% despite the fact that a sizeable excise tax hike on tobacco products in June dropped out of the index and was replaced by a smaller raise in September therefore this item should have had a dampening effect.

“The increase is mainly due to food and tobacco prices, the latter boosted by an excise tax hike in September. Various food groups have also shown an increase, most notably fresh vegetables, whose prices rose by nearly 40 percent year-on-year. Fuel prices have also risen substantially from the same period a year ago," commented KSH statistician Borbála Mináry to Reuters.

These were the key annual changes:

• Food prices rose by 4.6%, within which the price of seasonal food items (potatoes, fresh vegetables and fruits) became 21.2%, flour prices 7.8% and the price of eggs 7.0% higher and sugar prices 22.7% lower.
• The price of alcoholic beverages and tobacco was up by 5.1% and clothing prices edged up by 0.4%.
• The price of services grew by 1.8% on average.
• Consumer durable prices fell 0.1%.
• The price of electricity, gas and other fuels rose 1.5%, and consumers paid 14.9% more for motor fuels.

What do these data tell us?

Although the September CPI print is slightly over the central bank’s estimate, the acceleration was mostly the consequence of one-off factors. Underlying processes indicate gradually rising inflation therefore we should not cry excessive price pressure just yet. On the other hand, if motor fuel prices rose further, it would create an ever greater challenge for the central bank if it wanted to keep reassuring the world that even though inflation is close to the upper end of its tolerance range, there is still no risk of consumer prices skyrocketing in the current ultra-loose monetary policy environment. Market players are going to watch inflationary developments in the coming months even more closely.

Front page photo by MTVA/on commission by Csaba Jászai

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• cpi,
• economy,
• consumer price index,
• inflation