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Headline inflation slows to 3.4% in June

Hungaryʼs 12-month consumer price index (CPI) stood at 3.4% in June, slowing from 3.9% in both April and May, the Central Statistical Office (KSH) reported. In a month-on-month comparison, consumer prices dropped 0.2%, after rising 0.7% in May.

The 12-month headline inflation rate slowed as vehicle fuel prices dropped and part of the excise duty rise on tobacco left the base, according to the KSH.

Tobacco and alcoholic beverages prices still rose above average 12-month CPI. Prices of alcohol and tobacco climbed 7.1%, with tobacco prices alone rising 9.5%.

Food prices increased 5.8% in 12 months, including a 17.7% rise in seasonal food prices (potatoes, fresh vegetables and fruit). Pork prices rose by 12.1%, flour prices by 11.4%, and the price of bread by 8.0%, while milk prices fell 5.7%, coffee by 4.3%, and eggs by 2.6%.

Clothing and consumer durables prices edged up 1.0% and 0.4%, respectively, while household energy prices rose 1.2%. Prices in the category of goods which includes vehicle fuel were up 0.9% as fuel prices dropped 1.3% from a year earlier. Service prices rose 3.1%.

Core inflation, which excludes volatile food and fuel prices, stood at 3.8% in June. Harmonized for better comparison with other European Union member states, CPI reached 3.4%. Calculating with a basket of goods and services used by pensioners, CPI was 3.5%.

Excluding tax changes, consumer prices were up 3.2% in June from a year earlier.

In January–June 2019, compared to the first half of 2018, consumer prices went up by 3.5% on average.

Data for consumer prices in July 2019 will be published on August 8.

MNB underlying inflation down to 3.5%   

In its customary monthly analysis released after the publication of the KSH data, the National Bank of Hungary (MNB) attributed the drop in headline inflation mainly to decreasing fuel prices, while the drop in core inflation mainly reflected dropping alcohol and tobacco prices, state news wire MTI reported.

The central bankʼs measure of core inflation excluding indirect tax effects - which MTI noted is a bellwether indicator of underlying inflation - dropped 0.2 of a percentage point to 3.5% in June.

The MNBʼs indicator for demand-sensitive inflation, which excludes processed foods from core inflation, stood at 3.3%, dropping from 3.6% in the previous month.

The indicator for "sticky price" inflation, which includes items for which retail prices vary, on average, by no more than 15% a month, stayed unchanged at 3.9%.

The central bank said householdsʼ inflation expectations "remained at moderate levels" in June.

After their monthly rate-setting meeting in June, MNB policymakers said "core inflation excluding indirect tax effects is expected to rise slightly in the coming months, and then, due to external disinflationary effects, to decline gradually to 3% from the end of 2019."