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July inflation accelerates to 3.4%

Consumer prices were 3.4% higher on average in July 2018 than a year earlier. Significant price increases have been measured over the past year for motor fuels as well as tobacco, according to figures released by the Central Statistical Office (KSH). The headline figure accelerated from 3.1% in June.

The headline inflation figure released today proved even higher than previously forecast by analysts. Detailed figures show that food prices rose by 3.6%, within which the price of butter rose by 9.7%, pasta products by 9.2%, milk products by 7.2%, eggs and flour by 7.0%, and seasonal food items (potatoes, fresh vegetables and fruits) by 6.8%, while sugar became 23.5% cheaper.

The highest price increase of 7.5% on average was recorded for other goods (pharmaceutical products, motor fuels, household products, and recreational goods), within which consumers paid 17.8% more for motor fuels.

Prices of alcoholic beverages and tobacco were up by 5.3% on average, within which tobacco prices rose by 7.5%. The average price of services rose by 1.6%.

Electricity, gas and other fuels became 1.5% more expensive, within which firewood prices increased by 13.3% and butane and propane gas prices by 7.2%, while prices of electricity, natural and manufactured gas and purchased heat were unchanged.

Month-on-month, consumer prices were up by 0.3% on average. Food prices lessened by 0.1% – mainly due to a 2.6% decrease in the price of seasonal food items (potatoes, fresh vegetables and fruits). Excluding this latter group, food prices increased by 0.3% on average compared to the previous month.

Of the main groups of consumption, the highest month-on-month price rise of 1.0% was measured for consumer durables, within which vehicles became 1.9% more expensive. The price of services went up by 0.9%, within which prices of recreational services rose by 6.8% due to the summer high season. Consumers paid 2.4% less for clothing and footwear due to the summer sale.

In January–July 2018, compared to the corresponding period of the previous year, consumer prices increased by 2.5% on average.

Annual CPI harmonized for better comparison with other European Union member states stood at 3.4%. Seasonally adjusted core inflation, which excludes volatile fuel and food prices, was at 2.4%.

Calculating with a basket of goods and services typically used by pensioners, inflation was 2.9%.

Analyst Péter Virovácz of ING Bank told state news wire MTI that inflation growth was above the 3.3% market expectation for July, but core inflation remained unchanged. The analyst said he does not expect a change in the monetary policy of the National Bank of Hungary (MNB) as the numbers are in line with the central bankʼs forecast, while the price of oil and the exchange rate of the forint against the euro look to be stabilizing. Inflation could settle at 2.8% for the year, he concluded.

Gergely Suppan of TakarékBank attributed the bigger than expected CPI to rising fuel prices. As the forint has regained some of its strength, it should not push inflation higher for the rest of the year, he added. However, he warned that rising food prices could boost inflation in the near future.

Consumer prices for August 2018 will be published by the KSH on September 11.

MNB inflation indicators up in July

The National Bank of Hungaryʼs measures of underlying inflation rose in July compared to the previous month, the central bank said in a monthly assessment on Wednesday.

In July 2018, core inflation stood at 2.5% after rising 0.1 of a percentage point, while core inflation adjusted for the effects of indirect taxes was likewise up 0.1 of a percentage point at 2.4%.

According to the projection in the MNBʼs June Inflation Report, inflation temporarily rose slightly above 3%, driven by the sharp increase in oil prices. The 3% inflation target will be achieved in a sustainable manner by mid-2019, the central bank says.

The MNBʼs indicator for demand-sensitive inflation, which excludes processed foods from core inflation, rose from 2.1% to 2.3%. The indicator for sticky price inflation, which includes items for which retail prices vary, on average, by no more than 15% a month, rose from 2.4% to 2.7%.

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