Further bad news on inflation

HUNGARY - In Brief 04 Nov 2017 by Istvan Racz

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Regarding CPI-inflation, which happens to be in the MNB's narrow focus, almost everything is fine for now, or at least so it seems from where the Monetary Council is looking. But we think inflation is a much broader concept, and its various aspects are unlikely to remain fully isolated in any longer period. And so the following new stories must be all important:1. Industrial producer prices rose by 1.3% mom, 4.1% yoy in September, the latter up from +2.4% yoy in August. This was not least due to a 1.4% weakening of the forint against the euro during the month, to an EURHUF 308.4 average exchange rate in September. (The reader is kindly reminded that the MNB was actively talking down the forint in that period, presumably in a great part negatively impressed by the rather weak July industrial sales data.) Export sales prices of industrial products rose by 3.7% yoy in September, whereas domestic sales prices rose even faster, by 4.8% yoy. Within the latter, the prices of manufacturing rose by 6.2% yoy, so the price surge was not due to the energy sector, as a potential easy explanation, and the sales prices of sectors producing consumer goods were up by 5.2% yoy. By the way, domestic sales prices for the whole industrial sector were up by 4.9% yoy in the whole of January-September, so what we see now is by no means a short-lived temporary spike only. 2. "Construction prices rose by some 30% and we do not know where this process is going to end" said the other day minister Lajos Kósa, who is responsible in PM Orbán's cabinet for a major development program affecting the 12 biggest cities of Hungary. He used this argument to explain how the total estimated cost of the said ...