Hungary Nov CPI to drop sharply on fuels, base effects, says City


Hungary's headline consumer inflation is likely to have dropped sharply last month on the back of falling fuel prices and strong base effects, London-based emerging markets analysts said ahead of Tuesday's data release.

In an Econews poll conducted in the City, CPI forecasts for November ranged from 5.3% to 5.6% after a 6.0% year-on-year print in October.
Analysts at 4cast, a major London-based financial consultancy, said they expect CPI to have decelerated to 5.3%, thanks to fuel prices. "In our estimation, (fuel prices) will shave 0.35% points from the headline rate". Besides fuel, "the big question mark is food, especially as November is a quite volatile month for food prices". Here, "we expect the shock of the (poor) summer crops to continue to feed through and to affect processed food prices as well, but in light of the muted food CPI responses of the past two months, we did not pencil in a major spike in raw foods", 4casts analysts said.
Emerging markets economists at JP Morgan also predicted year-on-year headline CPI rate to have dropped to 5.3% in November, mostly on a large base effect caused by the hike in excise taxes on fuel, tobacco, and some alcoholic beverages last November. Also, fuel prices rose 3.4% last November, whereas they declined nearly 4% this November. While food prices likely grew above the seasonal trend, a high base should keep food inflation broadly stable, JP Morgan's London-based analysts said.
At the high end of the forecast range, economists at Goldman Sachs said, however, that they expect inflation to have fallen to about 5.6-5.7% last month. "This is above the consensus forecast ... owing to our expectations of a rather small fall in food inflation". But energy prices, including fuels, and lower core inflation should have contributed to a lower print, they added.


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