April CPI-inflation due tomorrow, first significant move downwards expected

HUNGARY - In Brief 09 May 2023 by Istvan Racz

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The median analyst, by Portfolio.hu's poll, expects 0.7% mom, 24% yoy, the latter down from 25.2% yoy in March. We are even more optimistic than this, expecting 0.8% mom for non-fuel inflation and -3.4% mom for fuels, the latter being an estimated actual, based on hontankoljak.net's data, a local website watching fuel retail prices on a continuous basis. This would imply the yoy headline rate decreasing to 23.6%, the mom rate being 0.5%. Where analyst optimism might be defeated this time is first of all commercial services, where inflation psychology and some cost factors, e.g in telecoms, have been driving up prices lately. Commercial services have been recently mentioned by the MNB as well, as a prime concern threatening rapid disinflation. Food, energy and industrial product prices are seen to be moving in favour of the official disinflation plans for now. When exactly the MNB will be convinced by price statistics that the sterilisation rate is to be cut would remain unclear even if analysts proved right on the April CPI data. This would be only the first real step downwards, and the yoy rate would be still very high, so rushing for a rate cut could be too early. On the other hand, this morning's KSH report on March foreign trade suggests that the EURHUF rate is getting rapidly increasing support from BOP fundamentals, and so it requires less and less support from the high sterilisation rate. Specifically, merchandise exports was up 16.5% yoy, whereas imports rose only 2.1% yoy, both in nominal EUR terms. This implied a Q1 trade SURPLUS of €1067m, a sharp turnaround from a €1299m DEFICIT in Q1 2022, which represents a 5% of GDP worth of positive swing. The new trade...