Hungarian inflation jumps to 4% in December

December headline inflation came in at 4.0% year-on-year, showing a 0.6 percentage point acceleration compared to the November reading. It seems like a big deal, but the move was in line with the market expectations and matched the latest forecast by the central bank.

As in November, the recent acceleration in the price increase was mostly caused by a technical factor related to energy, mainly fuel price developments. While December fuel prices increased by only 0.3% on a monthly basis, a year ago there was a 6.9% fall month-on-month. Against this backdrop, it hardly comes as a surprise, that the fuel price increase explains more than 0.5ppt of the 0.6ppt acceleration.

Other than fuel, only minor contributors were measured by the Central Statistical Office when it comes to the acceleration:

• Food inflation accelerated to 0.7% month-on-month, mostly driven by pork and related processed food prices;
• Tobacco products showed a 1.2% monthly price increase ahead of the January excise duty hike;
• Durable goods prices increased by only 0.1% on a monthly basis, translating into an almost 1% YoY drop;
• Price change in services came in at 0.1% MoM, but as last year’s increase was higher, it helped to shave off some hundredths from the headline reading.

The last two points show, that the underlying inflationary processes are slowing somewhat, so moving in the direction of the expectations of the central bank.

Core inflation (which excludes unprocessed food, energy & administered prices) came in at 3.9% YoY in December, posting a 0.1ppt drop compared to the November reading. Moreover, if we adjust this reading for tax changes, core inflation excluding indirect taxes show also a 0.1ppt retreat to 3.5% year-on-year.