Hungary November CPI drops on fuel, core climbs further - Macrocomment from Concorde Securities

November inflation was 3.1%, down 0.7pps from a month earlier. Core inflation was unchanged at 2.6%, the KSH reported yesterday.

HEADLINE AND CORE INFLATION (YOY)

The headline inflation was boosted mainly by petrol prices and unprocessed food prices (base effect of eggs stand out).

CONTRIBUTION TO THE RISE IN CORE CPI* (PPS)

Source: MNB, Concorde; *Cumulative since trough in July 2016

While the core has been stuck at around 2 and a half percent during the course of a year, its composition has been continuously tilting towards market services, i.e. the component reflecting longer term price developments, - a phenomenon also visible in this month’s reading.

MNB’s alternative core indicators reflect the continuation of the recent rise in underlying inflation pressure. All indicators grew further, sticky price inflation has even rose to 3%, unseen since 2010. The sharp deceleration in November was chiefly assisted by the non-core items, mainly petrol and unprocessed food prices. The underlying inflationary pressures remain intact.

HEADLINE AND UNDERLYING INFLATION (YOY)

Market services prices have behaved in November according to seasonal patterns. We find it justified to believe that the pressure on inflation from the direction of services remains the case. Market services – given their heavy dependence on labor cost – can be considered as proxy for the pass through of wage inflation into consumer price inflation.