Inflation up in August, industrial output growth temporarily (?) down in July

HUNGARY - In Brief 08 Sep 2017 by Istvan Racz

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Inflation data for August came out marginally higher than market expectation, and pretty much in line with our forecast, this morning. The headline rate jumped to 2.6% yoy, quite sharply up from 2.1% yoy in July, despite just 0.1% rise in the CPI in August alone. Just as we wrote in our previous note on the subject the other day, much of this jump was due to a base effect related to fuel prices, which cannot be regarded as a core element of the index. However, the recent upward trend of core inflation was maintained, as:- non-fuel inflation rose to 2.4% yoy, from 2.3% yoy in July, on no change in non-fuel prices in August alone, even though non-fuel prices tend to fall slightly at this time of the year, given a usual seasonal downturn of food prices;Source: KSH, own estimates- core inflation, as calculated by the KSH, was 0.2% mom, 2.8% yoy, the annual rate up from 2.6% in July, continuing the row of systematic rises in recent months; and- the three adjusted core rates, estimated by the MNB, are now between 1.9-2.4% yoy, up from 1.7-2.3% yoy in July and from 1.6-2% in May (three month ago).Source: MNBSomewhat curiously, the MNB published an analyst article in Portfolio.hu yesterday, which, based on an analysis of data running through July, claimed that even KSH's core inflation indicator was pushed up recently by rising excise taxes on tobacco products, a one-off factor, and by a cyclical surge of the prices of dairy products, not really a core element either. As usual, the MNB article played down the importance of the existing tight labor market and the resulting massive upward wage pressures, concluding that the headline inflation rate is likely to reverse its recent...