Economy 6 December 2021, 10:05am

St. Nick to bring price boom instead of candy this year

Portfolio

Saint Nicholas is coming tonight, but he will almost certainly bring a piece of coal to most as we are facing inflation higher than in any recent period. The Central Statistical Office (KSH) will publish November CPI this week, which is expected to be higher than October’s 6.5%. The bag of gifts in the shoes will be mixed outside Hungary as well, as Czechia the U.S. and China will all release CPI this week and neither of these will be a low figure. There will also be other important events this week, so we will not be bored.

There is no major data release scheduled for Monday in Hungary, and only October’s German factory orders from abroad. Of course, the first day of the week may bring unexpected events as traders react to news over the weekend Monday morning, and we will also receive pandemic data from the weekend. We could possibly even learn something new about the Omicron variant, which investors and economic decision-makers have been waiting for.

Things will pick up on Tuesday when the KSH publishes October industrial output statistics, while the National Bank of Hungary (MNB) will hold a bond purchase auction. The latter merits attention as the central bank is in a tightening cycle and is tapering its QE programme. This shows in the volume of bonds purchased as well. Outside Hungary, there will be industrial statistics from Germany, revised GDP from the euro are and foreign trade data from the U.S.

Wednesday is inflation day as the KSH will release November CPI in the morning. October CPI was an unpleasant surprise, but November’s will likely be even higher. The MNB will have to pay attention not just to inflation in Hungary but also to Poland’s rate decision: the Polish central bank has delivered surprises at its recent policy meetings, and if they again go for a higher than expected rate hike, that will change expectations towards the entre CEE region including Hungary. Also on Wednesday, we will see the headline figures of the November budget balance.

There will be no stopping on Thursday, either: foreign trade plays an increasingly important role in the era of twin deficit, and we will learn how it performed on October. The previous month indicated an unfavourable trend, so it will be important to see if this changed as foreign trade deficit is a major factor in the weakening of the forint. We will also be paying attention to the MNB’s one-week deposit tender as it could bring a change in the benchmark rate. Reacting to decreasing pressure from the FX market, the central bank only raised the benchmark one-week rate by 20bp last week, compared to 40bp in preceding weeks, the tethe MNB will probably also make this week’s decision depending on developments. Meanwhile, China will publish it latest CPI, with the Asian giant only one step away from stagflation.

We will have a quieter day on Friday, with no major domestic data release scheduled. Of course, there could always be unplanned events, and the weekly radio interview of Prime Minister Viktor Orbán could well include announcements or messages of a business or economic nature. Outside Hungary, excitement will stem from the U.S. inflation index, which could reach a peak not seen for decades and could form the basis of the Feds decision next week.

Cover photo: Getty Images