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Consumer prices rise 1.9% in February

Consumer prices were 1.9% higher on average in February 2018 than a year earlier, slowing from 2.1% in the preceding month, shows a first release of monthly data from the Central Statistical Office (KSH). The highest price increases in this period were measured for alcoholic beverages and tobacco, as well as food.

In February 2018 compared to February 2017, food prices rose by 3.9%, within which the price of eggs rose 37.1%, butter 13.5%, milk products 7.4%, and bread 6.0%. Sugar became 14.2% cheaper.

The highest price increase of 6.4% on average was recorded for alcoholic beverages and tobacco.

Electricity, gas and other fuels became 1.6% dearer year-on-year, within which the price of firewood rose 14.4%, and butane and propane gas 7.9%, while the prices of electricity, natural and manufactured gas and purchased heat were unchanged.

The price of services was up by 1.0% on average. Consumers paid 0.3% less for clothing and footwear, and 0.5% less for other goods (pharmaceutical products, motor fuels, household products and recreational goods), within which they paid 2.0% less for motor fuels, and 1.0% less for consumer durables.

Seasonally adjusted core inflation, which excludes volatile fuel and food prices, was up 2.4% in February. CPI calculated with a basket of goods and services used by pensioners was 2.1%.

In February 2018 compared to the preceding month, consumer prices increased by 0.2% on average.

In January–February 2018 compared to the first two months of 2017, consumer prices went up by 2.0% on average.

Consumer price data for March 2018 will be published by the KSH on April 10.

Underlying inflation unchanged, says MNB

In a monthly analysis released after the publication of the KSH data and cited by state news wire MTI, the National Bank of Hungary (MNB) said its measures of underlying inflation developments were "broadly unchanged" in February from the previous month. The measures remained at or around 2%, below the level of core inflation, it added.

The MNBʼs indicator for core inflation, excluding the effects of indirect taxes, fell to 2.1% in February, down from 2.2% in the previous month.

The indicator for demand-sensitive inflation, which excludes processed foods from core inflation, was unchanged at 1.7%.

The indicator for sticky price inflation, which includes items for which retail prices vary, on average, no more than 15% a month, fell from 2.2% to 2.0%.

Householdsʼ inflation expectations "remained at moderate levels" during the month, the central bank added.

A flash report sent to the Budapest Business Journal by the research department of CIB Group noted that in the general trend of inflation, the intensification of domestic demand and the effects of wage increases continue to appear more slowly than expected, primarily due to the demand emerging in the housing market.

"However, the ongoing rise of wages still represents a source of upward risk," the report added. "For this reason, and partly given the stronger base effect in Q1, we see the mildness of inflation at the beginning of the year as temporary."

Based on CIBʼs forecast, the second quarter of 2018 should deliver monthly inflation figures of between 2.3% and 2.6%, while annual average inflation is likely to arrive a little above the 2017 figure, at close to 2.5%. However, a sustained breach of the 3% inflation target is not projected, CIB added.