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July inflation edges down to 3.3%

Hungaryʼs annualized consumer price index (CPI) stood at 3.3% in July, slowing from 3.4% in the previous month, the Central Statistical Office (KSH) said on Thursday. Headline inflation was lifted by significant increases in the prices of alcohol and tobacco products, as well as food.

Food prices went up by 6.0% year-on-year in July, within which the prices of seasonal food items (potatoes, fresh vegetables and fruit) rose 19.2%, pork prices 12.7%, flour 10.1%, and bread 8.4%, while milk prices fell 5.4%.

Prices of alcoholic beverages and tobacco rose by 8.5% on average, within which tobacco prices rose by 12.4%. Consumers paid 2.8% more for services, within which rents increased by 9.8%. The price of motor fuels was cut by 2.4% year-on-year.

Consumer durable prices fell 1.4% in July, clothing prices were up 1.9%, household energy prices increased 1.1%, and prices in the category of goods which includes vehicle fuel edged up 0.4%.

Seasonally adjusted core inflation, which excludes volatile fuel and food prices, was 3.7% year-on-year in July, while inflation adjusted for goods and services used by pensioners was 3.5%. Harmonized for better comparison with other EU Member States, CPI reached 3.3%.

In a month-on-month comparison, consumer prices inched up 0.2% as the price of spirits and tobacco products rose 1.4% and service prices increased 0.5% compared to June.

In January–July 2019, compared to the first seven months of 2018, consumer prices went up by 3.4% on average.

Consumer price data for August will be published on September 10.

Underlying inflation drops to 3.2%

In its customary monthly analysis released after the publication of the KSH data, the National Bank of Hungary (MNB) attributed the drop in headline inflation mainly to lower fuel prices, while core inflation fell because of a decline in the price of industrial goods.

The central bankʼs measure of core inflation excluding indirect tax effects - which state news wire MTI describes as a bellwether indicator of underlying inflation - dropped to 3.2% in July, from 3.5% in June.

After a monthly rate-setting meeting in July, MNB policymakers said core inflation excluding indirect tax effects "is likely to decline gradually to 3% from the end of 2019."

The MNBʼs monthly analysis shows the central bankʼs indicator for demand-sensitive inflation, which excludes processed foods from core inflation, stood at 2.9%, dropping from 3.3% in the previous month. The indicator for "sticky price" inflation, which includes items for which retail prices vary, on average, by no more than 15% a month, fell from 3.9% to 3.4%.

The central bank noted that householdsʼ inflation expectations "remained at moderate levels" in June.