Economy 8 December 2021, 9:00am

Hungary’s November inflation breaks 14-year record

Portfolio

Consumer prices in Hungary were 7.4% higher on average in November 2021 than a year earlier. The last time the inflation was this high was in December 2007, the Central Statistical Office (KSH) said on Tuesday. Analysts believe inflation has peaked and will gradually ease off in the next few months.

Analysts expected inflation t rise above 7% in November following the 6.5% October figure. The consensus of analysts polled by Portfolio was a CPI of 7.3%.

The last time CPI reached 7.4% was at the end of 2007, which means

INFLATION IN HUNGARY BROKE A 14-YEAR RECORD.

Core inflation also rose from 4.7% to 5.3%. Overall, data suggest that following a temporary price rise and base effect in certain product groups this spring, prices are now increasing across the board. The higher price of consumer durables shows a major change in the nature of inflation. This product group has typically acted to cool inflation in recent decades as the external environment guaranteed low inflation for import products. This has now changed completely as commodity and energy prices, as well as economic stimulus measures, boosted inflation globally, and the weaker forint made matters even worse.

In annual terms, the KSH recorded the following price increases: food +6.0%, edible oil +26.9%, flour +20.2%, margarine +19.5%, bread +12.1%, rolls +11.3%, canteen meals +10.5%, poultry meat +9.0%, restaurant meals +8.8%. Motor fuel prices leaped by 37.7% and the price of household repair and maintenance goods was up 14.2%. Alcoholic beverages and tobacco prices rose by 11.0% on average, within which tobacco prices went up by 16.8%. Consumers paid 6.6% more for consumer durables, within which 14.7% more for kitchen and other furniture, 13.2% more for living and dining room furniture, 8.5% more for television sets and 7.1% more for new passenger cars. Services charges were up by 4.6%, within which the repair and maintenance of dwellings cost rose 14.5% and the repair and maintenance of vehicles cost 9.1% more for consumers. Consumer prices rose 0.7% month on month in November. In monthly terms, the stats office recorded the following price changes: food +0.8%, flour +7.4%, rolls +4.3%, bread +4.0%, cheese +3.1%, sugar +1.9%, pasta products +1.7%, eggs +1.5%, salami, sausages and ham -1.0%. Clothing and footwear prices were up by 1.2%, the price of motor fuels rose 2.0% and that of firewood went up 2.3%. Prices went up also at consumer durables (+1.2%), including kitchen and other furniture (+2.3%), second-hand passenger cars (+2.1%) and television sets (+1.9%). In January-November, consumer prices rose by 4.9% for all households on average and by 4.4% among pensioner households.

Due to the strong inflationary pressure, the National Bank of Hungary (MNB) is expected to continue its rate hike cycle in coming weeks, starting on Thursday through the benchmark one-week deposit rate. This will be followed by the December policy meeting next week, after which the central bank will also release its latest inflation forecast. Governor György Matolcsy has already indicated that the MNB expects CPI to be around 5% in 2022, substantially higher than the 3.4% to 3.8% forecast in September.

According to analysts, inflation probably peaked in November and we will see a gradual decline in coming months. Meanwhile, MNB deputy governor Barnabás Virág said core inflation is expected to keep rising for a while.

Cover photo: Getty Images