Economy 13 January 2023, 12:07pm

Hungary central bank inflation indicators show further rise

Portfolio

Hungary's inflation continued to rise in December 2022, albeit less than expected, according to data published by the Central Statistical Office (KSH) on Friday morning. The central bank's (MN) measures of underlying inflation also continued to move upwards, meaning there is little reason to be cheerful about the smaller-than-expected rise.

Inflation in Hungary was 24.5% yr/yr in December, down from 22.5% in November and below the 25.8% consensus estimate of analysts polled by Portfolio. Consumer prices last rose this sharply almost 27 years ago, in March 1996. The average annual inflation rate was 14.5% in 2022, the highest since 1997.

The MNB has also released its own measures of underlying inflation, showing that core inflation excluding indirect tax effects rose to 24.7% from 23.8%. Demand-sensitive inflation was 18%, up from 17.3% in November, while inflation for goods with infrequently changing prices (sticky-price inflation) was 18.5%, up from 18.2% the previous month.

"Inflation rose by 2.0 percentage points relative to the previous month which was entirely due to a pick-up in fuel prices. Prices in this product group rose by 27% compared with December 2022, as a result of scraping the cap on fuel prices on 7 December, which contributed 2.0 percentage points to a rise in inflation," the MNB said.

without the lifting of the price freeze, inflation in hungary could have peaked as early as December.

Core inflation rose by 0.6 percentage points relative to the previous month. Half of the increase in core inflation was caused by processed food prices (0.3 percentage points). The monthly change in the basket calculated excluding fuel and regulated product prices was down 1.2% , the lowest level seen since March.

Processed food prices rose by 3.0%, while unprocessed food prices declined by 0.3% compared to November, thus rise in prices in the entire product group showed the lowest monthly rate in 2022.

The fall in gas prices was due to a higher share of consumers' consumption falling below the volume limit of the lower officially regulated price, due to the adaptation of households and favourable weather conditions.

The indicators, measuring households’ inflation expectations, showed unusually high volatility. The indicatorsremained broadly unchanged in December compared to the previous month.