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Consumer prices up 2.8% year-on-year in May

Consumer prices were 2.8% higher on average in May 2018 than a year earlier, according to monthly data released Friday by the Central Statistical Office (KSH). The highest price increases in this period were measured for alcoholic beverages and tobacco, as well as for motor fuels.

The headline increase in consumer prices accelerated again in May, from 2.3% in April, and 2.0% in March.

Annual CPI harmonized for better comparison with other European Union member states stood at 2.9%. Seasonally adjusted core inflation, which excludes volatile fuel and food prices, was 2.4% year-on-year, while inflation adjusted for a basket of goods typically purchased by pensioners was 2.6%.

In May 2018 compared to May 2017, food prices rose by 3.8%, within which eggs were 14.3%, butter 12.7%, pasta products 9.6%, milk products 7.5%, and flour 6.1% more expensive. Sugar became 19.9% cheaper.

The highest price increase of 5.2% on average was recorded for alcoholic beverages and tobacco.

Consumers paid 4.3% more for other goods (pharmaceutical products, motor fuels, household products and recreational goods), within which motor fuels were 9.5% dearer.

The price of services was up by 1.7% on average. Electricity, gas and other fuels were 1.3% more expensive, within which firewood prices increased by 13.2%, and butane and propane gas prices by 3.6%, while prices of electricity, natural and manufactured gas and purchased heat were unchanged. Consumers paid 0.8% more for clothing and footwear, and 1.2% less for consumer durables.

In May 2018 compared to the preceding month, consumer prices rose marginally, by 0.6% on average. Food prices likewise rose by 0.6%, mainly due to a 6.0% rise in the price of seasonal food items (potatoes, fresh vegetables and fruit).

In January–May 2018, compared to the first five months of 2017, consumer prices rose by 2.2% on average.

Consumer price data for June 2018 will be published on July 10.

Underlying inflation measures unchanged

In a monthly analysis released after the publication of the KSH data, the National Bank of Hungary (MNB) said its measures of underlying inflation developments were "effectively unchanged from April."

"The measures continued to be at or around 2% and remained below the level of core inflation," it noted.

The indicator for core inflation, excluding the effects of indirect taxes, stood at 2.2% in May, unchanged from the previous month.

The indicator for demand-sensitive inflation, which excludes processed foods from core inflation, rose from 1.9% to 2.0%.

The indicator for sticky price inflation, which includes items for which retail prices vary, on average, no more than 15% a month, fell from 2.3% to 2.2%.

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

Speaking to state news agency MTI, Péter Virovácz, senior analyst at ING Bank, noted that May CPI came close to the central bankʼs target for the first time since February last year, while core inflation remained unchanged at 2.4%. Therefore, he observed, the central bank is not expected to consider this a sustained rise in inflation.

Virovácz noted that the rise in fuel prices alone accounted for 0.5 of a percentage point of the increase in the headline figure, while price rises of food, spirits and tobacco slowed down slightly.

INGʼs analysts predict 2.6% average inflation in 2018, while Gergely Suppan of TakarékBank forecast 2.7% average inflation this year.