Economy 14 January 2021, 9:00am

Consumer prices rose 2.7% in Hungary in December 2020

Portfolio

Consumer prices rose 2.7% year on year in Hungary in December 2020, the Central Statisical Office (KSH) reported on Thursday, causing no surprise with the data, as analysts polled by Portfolio projected inflation to come in at 2.7-2.8%. The price of alcoholic beverages, tobacco products and food rose significantly in annual terms. CPI edged up 0.3% month on month and annual average inflation reached 3.3%.

Consumer prices started to rise dynamically after the coronavirus outbreak petered out and the economy was reopened in Hungary. CPI peaked at 3.9% yr/yr in August and then started to trickle down to come in under the MNB target at 2.7% in November. There was no change in December either, as the stats office recorded a 2.7% headline index again.

Yet core inflation, which gauges underlying processes better, filtering out energy price changes, for instance, rose 4.0% yr/yr in the last month of 2020. As you can see on the chart below, core inflation has been rising more and more permanently than the headline index.

In 12months, compared to December 2019:

Food prices were up by 4.9%, within which the KSH recorded a price increase in the case of edible oil (13.7%), seasonal food items - potatoes, fresh vegetables and fresh domestic and tropical fruits together – (11.8%), sugar (11.7%), meals at canteens (10.2%), other meat preparations (7.8%) and flour (6.8%). Price decrease has been measured in case of pork (-3.9) and poultry meat (-0.9%).
The price of alcoholic beverages and tobacco rose by 8.8% on average, within which tobacco prices went up by 14.4%.
Consumers paid 2.8% more for consumer durables
and 4.5% less for motor fuels.

In 2020 compared to the previous year:

Consumer prices rose by 3.3% on average,
within which the highest price rise of 7.2% was measured for food.
Alcoholic beverages and tobacco prices increased by 6.9%,
the price of services by 2.9%,
that of consumer durables by 1.4% and
electricity, gas and other fuels prices by 0.3%.
Clothing and footwear prices were unchanged on average, and
the price of other goods lessened by 0.9%.
Consumer prices were up by 3.8% on average among pensioner households.

What does the future hold?

Analysts think that in parallel with a much-awaited recovery from the coronavirus crisis in 2021, the consumer price increase will gather pace too, and they project the end-year CPI at around 3.5%. By 2022, they forecast moderation and the headline figure to be back close to the central bank's 3.0% target. Of course, such long-term estimates are surrounded by various uncertainties.