Analysts: CPI downturn surprising, no deflation risk


Hungary’s consumer price inflation unexpectedly weakened in October after rising in the previous month, latest data showed Tuesday. The consumer price inflation slowed to 0.9% in October from 1.4% in September, the Central Statistics Office (KSH) reported yesterday.

In August, the inflation rate was 1.3%. Twelve-month consumer price inflation fell to its lowest level since 0.6% measured in February 1974 as a government-initiated cut in utilities prices was helped by steeply lower fuel prices.

Food prices grew 1.1% y.o.y., weaker than the 1.7% rise seen a month earlier. Clothing and footwear prices dropped 1.4%, and consumer durable goods prices fell by 1.9%. Costs of electricity, gas and other fuels were lower by 8.9% than in October 2012.

On a monthly basis, the consumer price index declined 0.3%. Hungary’s harmonized index of consumer prices (HICP), moved up 1.1% annually in October. Month-on-month, the HICP decreased by 0.3%.

Poll, Barclays: Sustained deflation no serious risk
Hungary’s consumer inflation collapsed to a four-decade low largely on the back of tame food price pressures and the higher retail margins failing to feed through to tobacco prices, but sustained deflation is still not a pronounced risk, London-based emerging markets economists said after the release on Tuesday of a much lower-than-expected CPI data for October.

Year-on-year headline inflation eased to 0.9% last month after a 1.4% print in September.

Forecasts in an Econews survey had varied in a narrow 1.2% to 1.4% range. William Jackson, senior emerging markets economist at Capital Economics, a major London-based global financial consultancy, stressed after the data release that core inflation still remains relatively high at 3.4% year-on-year.

On a similar note, Daniel Hewitt, chief emerging markets economist at Barclays, said he expects the National Bank of Hungary (MNB) to continue to cut rates by 20bp per month, reaching 3.00% at the end of 2013. “We also expect another cut in 2014 to 2.80% and we do not rule out further cuts depending on financial market conditions,” he added.

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