Inflation surprised on the downside again

HUNGARY - In Brief 09 Feb 2024 by Istvan Racz

---

The headline CPI-inflation rate for January was reported at 0.7% mom, 3.8% yoy this morning, defeating analysts' median expectation of 4.2% yoy (even more our forecast of 4.5% yoy), and representing a sharp drop from 5.5% yoy in December. This means that inflation is now within the MNB's 2-4% medium-term target range, which is a major surprise. Core inflation also fell sharply, to 6.1% yoy from December's 7.6% yoy, but the fact that it is still significantly higher than the headline rate is kind of a warning sign. Non-fuel inflation, which we derive from KSH's data and believe to be telling, decreased by a full percentage point from the previous month, to 5.4% yoy in January. A few comments on how analysts could be surprised this much may be justified. First, even though the median analyst missed the actual yoy headline rate by four decimal points (see our related note of yesterday), the fact is that with the one-decimal-point accuracy with which KSH publishes its monthly figures, the product of the actual monthly inflation rates for the last twelve months gives 4% yoy rather than the reported actual of 3.8% yoy. This means that to get to the expected 4.2% yoy, the median analyst had to predict 0.9% mom, which is only two decimal points away from the actual number. Monthly development of CPI-inflation Note: Yoy changes in %; Sources: KSH, own estimates Second, KSH reported -0.5% mom change for fuel prices, which is somewhat surprising after the independent Holtankoljak.hu's report of a 3.7% rise of the average monthly price for the two predominantly important basic types of motor fuels for the month. We cannot explain this difference at all, but we know that its loweri...