Awful inflation numbers for October, and it is not the end yet

HUNGARY - In Brief 09 Nov 2021 by Istvan Racz

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Well, this was really disastrous. The headline rate of CPI-inflation rose to 6.5% yoy, up from 5.5% yoy in September. The median of analyst expectations by Portfolio.hu's poll was 6.1%. Core inflation and non-fuel inflation also went up sharply, to 4.7% yoy and 5.2% yoy, respectively:CPI-inflation and core inflationNote: Yoy changes in %; Sources: KSH, MNB, own estimatesFor sure, fuel prices rose by 7.3% in a single month, on a 9.1% rise by wholesale prices, which, by the way, will have a +3.2% mom carry-over effect in November, together with the domestic price movements of fuel since end-October. But that was no ground for a surprise. Indeed, the prices of a wide variety of items went up significantly, except, importantly, services and household energy. In the latter case, the majority of prices are administratively fixed, meaning that the current problem with European gas prices will have a direct effect only much later on, when that system has become fiscally unsustainable. However, much of the October surprise on the upside must have originated in the fact that the indirect, second-round effect of the current elevated level of fuel and gas prices on the prices of industrial and agricultural products, some services and imports is very significant. Please, note that the latest available producer / wholesale price inflation numbers are depressingly high: agriculture +24.1% yoy (August), industry +14% yoy (September), and imports +12.6% yoy (August). And it is completely sure that all this has not been passed through to CPI-inflation yet, to put it mildly. For example, the consumer prices of food went up by 5.2% 'only' in the year to October.So, we had 1.1% monthly con...