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Food Price Cap Abolition Had Minimal Market Impact

Analysis

According to the analysts at MBH Bank's Agricultural and Food Business, the abolition of food price stops at the beginning of August had a minimal effect on the development of store prices.

“The abolition of food price stops had a minimal effect, since the base price of the price-stopped products was in some cases 15-20% higher from one month to the next. In addition, the price level established at the beginning of the year on the pork market has just hit the stores,” shares Csaba Héjja, senior analyst at MBH Bank's Agricultural and Food Business.

In response to the inflation data presented by the Central Statistics Office (KSH), MBH Bank shared that inflation within the food market has reached a new, lower level, with the increase in the price of food decreasing to less than 20% in August.

“The slowdown in inflation since January continued last month, and we are still heading towards single-digit inflation by the end of the year,” they highlight.

According to a statement from MBH Bank, an average shopping trip [in August] cost 19.5% more than in the same period in 2022. In July, the rate of food inflation was 23.1% year-on-year. On a month-by-month basis, however, the level of price increases increased, albeit only by 0.3%.

“It should be emphasized that 60% of the products in the consumer basket did not increase in price at all, and in fact, half of the products became cheaper in August than they were in July. In most cases, this is part of a trend-like decrease since the beginning of the year. Only a fifth of the products experienced a price increase of over 1% compared to July, but this is also basically the result of the already mentioned effect of the abolition of price caps and natural market processes,” Héjja points out.

MBH Bank's agricultural and food industry experts highlighted that, despite the fact that food prices have risen somewhat overall on a monthly basis, they still predict with high confidence that food inflation will be in the single digits by the end of 2023 in an annual comparison.

Attention was also drawn to the fact that, according to the food inflation index compiled by the statistical office of the European Union, Hungary has the second lowest month-to-month price increase, dealing with an average of 0.2% price increase per month so far this year.

This year, both in Hungary and around the world, consumers can expect a larger harvest of grains and oilseeds than last year, in addition to a 5-10% drop in turnover in the domestic food retail trade.

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