CPI jumps on base effect in December - Macrocomment from Concorde Securities

December inflation was 4%, up 0.6pps from a month earlier. Core inflation fell slightly to 3.9% from 4.0% in November. Average inflation in 2019 reached 3.4%.

HEADLINE AND CORE INFLATION (YOY)

Source: CSO, Concorde

The headline inflation rose mainly as core prices hover at below 4%.The headline rate rose chiefly on fuel prices at the end of the year (statistical base effect), assisted modesty by the raw food price hikes (pigs).

HEADLINE AND UNDERLYING INFLATION (YOY)

Source: MNB

The central bank’s underlying inflation indicators have changed only modestly, demand sensitive and sticky prices remained broadly flat, while net core dropped by a modest 0.1pps relative to the previous month. Net core (at 3.5%) is well above the level (3%) described earlier by the MNB as ‘to be watched closely’ regarding its implication for the perseverance of inflation pressure / compatibility with price stability. Such reference has been dropped by the central bank lately.

Market services price increase exceeded the seasonal experience in autumn months, was roughly flat in December.

MARKET SERVICES PRICES (M-O-M)

Source: KSH, Concorde

Telco prices gave back some of the gains experienced in autumn months, adding to the gradually rising pressure from other services.

MARKET SERVICES LESS TELCO (M-O-M)

Source: CSO, Concorde

Unprocessed food prices’ inflation rose to 9.9% from 7.8%, on an annual basis, primarily caused by pig meat. The impact on the long term inflation is uncertain, depends on the evolution of the African swine fever.

We see the January CPI to rise to 4.3%, mainly due to the same reasons as lately: swine meat pressure as well as the base effect from oil prices. The spring months could bring about a significant decrease in the CPI if global crude prices remain at around today’s levels.

 

We forecast average CPI in 2020 to reach 3.6%, and the yearend forecast is 3.4%

 

 

 

Hai Thanh Le Phuong, CFA
Head of Research

CONCORDE SECURITIES LTD.

Alkotás Point
50 Alkotás street, H-1123 Budapest.
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