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March CPI in line with expectations

Twelve-month consumer price inflation slowed to 2.9% in March from 3.0% in February , the Central Statistics Office (KSH) said on Friday. The figure is in line with market expectations.

Consumer prices rose 0.5% month-on-month in March, slowing from a 1.0% increase in February.

Seasonally-adjusted core inflation was 0.2% in a month-on-month comparison, unchanged from February. In a twelve-month comparison, core inflation dropped to 3.1% from 3.3%.

Clothing prices increased 2.4% month-on-month as the new summer lines were introduced. Food prices rose 0.7%, over the headline figure, because of higher seasonal food prices.

Excluding these prices, food prices rose just 0.1%. A 1.1% rise in tobacco prices -- tobacco carries a 3.1% weight in the consumer basket -- also contributed to March inflation.

Household energy prices were flat, but vehicle fuel prices rose 0.4%, under the headline figure. Despite a further 2% weakening of the forint, prices for durable consumer goods fell 1.0% as new car prices dropped 2.8%.

Prices of refrigerators and freezers, audio and video appliances and cameras also fell. Service prices rose 0.5%, in line with the headline figure.

In a twelve-month comparison, consumer durable prices dropped 1.2% and vehicle fuel prices were down 16% in March. Clothing prices fell 0.5%.

Twelve-month service prices climbed 3.0%, in spite of a 6.1% rise in housing costs, including a 10.6% hike in trash pickup fees. Local transportation fares and prices for postal services both rose 6.8%. Healthcare service prices dropped 15.3%. Telephone tariffs fell 0.4% and internet tariffs slipped 0.2%.

Food price increase accelerated to 5.2% yr/yr in March after rising under 5% in each of the previous four months. Meat prices climbed 9.0% including 15.0% increase in pork prices. Vegetable prices rose 6.8%, but potato prices were down 2.0% and prices for fresh domestic and tropical fruit prices fell 14.2%.

Household energy prices rose 11.3% from March 2008 on the back of a 27.5% increase in gas prices and a 23.1% rise in coal price. Electricity price were up just 2.8%.

CIB Bank chief analyst Mariann Trippon said the only cause for surprise was the 1.0% month-on-month drop and the 1.2% yr/yr fall in consumer durable prices after rising in the previous two months. A reason for the drop could be falling car prices, she added.

Service prices continued to slow in March, as demand fell because of the recession. They rose just 0.5% in a month-on-month comparison, from 0.6% in February and 0.9% in January, Ms Trippon said.

Twelve-month CPI could fall another one or two tenths of a percentage point by mid-year, but inflation will pick up again in the second half because of the planned introduction of a higher VAT rate and an excise tax rise, she said, putting average annual inflation around 3.5%.

K+H Bank’s György Barcza also said it was interesting that consumer durable prices fell in spite of a weaker forint. He, too, put down the fall to a drop in new car prices.

The planned increase in the main VAT rate is likely to add 2.0-2.5 percentage points to inflation, he said. (MTI-Eonews)