Dec price rise no surprise; VAT increase to lift Jan CPI - analysts

Food

The December increase in consumer prices in Hungary was in line with expectations, but analysts said tax increases introduced at the start of 2012 would probably lift CPI in January.

Consumer prices rose 4.1% year-on-year in December, the Central Statistics Office (KSH) said on Friday. Average annual inflation was 3.9%.

Erste Bank’s Zoltan Arokszallasi said the headline figure for December was no surprise, but added that food prices rose more slowly than expected while alcohol and tobacco prices rose faster than thought. He said the pickup in core inflation from 3.1% in November to 3.3% in December could be reason for concern.

Mr Arokszallasi said January CPI could climb over 5% because of an increase in Hungary’s main VAT rate from 25% to 27% from January 1 as well as the weaker forint.

Gergely Suppan of TakarekBank noted that the rise in alcohol and tobacco prices was the result of excise tax increases in November. He also said food prices rose less than expected. He added that CPI would likely remain over the National Bank of Hungary’s 3% "price stability" target until the second quarter of 2013, when tax increases fall out of the base period.

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