Disinflation met positive expectations in June

HUNGARY - In Brief 07 Jul 2023 by Istvan Racz

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CPI-inflation for June was reported this morning exactly as private sector analysts expected, at 0.3% mom, 20.1% yoy, falling from 21.5% yoy in the previous month. In fact, this was also the figure expected by the MNB for June in its recently issued Q2 inflation report, and it was only moderately higher than the MNB's 19.8% yoy forecast given in the Bank's previous quarterly inflation report, the one released in late March. Core inflation also looked nice in June, dropping to 20.8% yoy from 22.8% yoy in May, on the same 0.3% monthly increase. Non-fuel inflation, which we estimate from KSH data, did even better this time, with 0.1% mom, 19.9% yoy, descending from 21.6% yoy in the previous month. This was possible as fuel prices actually rose by 2.2% in June, pulling the monthly headline rate moderately upwards in that period. For H2, everyone expects the current robust momentum of consumer disinflation to stay, given highly favourable base effects, good weather helping to contain food prices (somewhat counter-intuitively, El Nino means more rain than usual for Hungary), weak consumer demand, and the settling down of international commodity prices. In the Q2 inflation report, the MNB has headline rates of 17.5% yoy for July, 15.6% yoy for August, 11.2% yoy for September, and only 6.3% yoy for December. This seems a bit too optimistic, given the (partial) lifting of food price caps from August, the likely weakening of the forint, as interest rates are reduced, and the expected (moderate) recovery of real consumer demand in Q4. The median expectation of private sector analysts for December was 7.7% yoy in yesterday's poll by Portfolio.hu, and this also happens to be our cu...