Is inflation still accelerating? Well, it depends...

HUNGARY - In Brief 08 Jan 2023 by Istvan Racz

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Looking at CPI data, the answer is a clear YES. But looking at producer prices, the answer must be much more like a clear NO. Given sharply weakening consumer demand and the close to spectacularly strengthening currency, the latter seems to be more logical. But there is still a good amount of pent-up inflationary pressure, coming from the cost side. Most of that pressure has been caused by earlier administrative measures to hold back the pass-through of producer/import prices to consumer prices. These measures are now falling one by one, as they are proving to be unsustainable. As for details, the December 2022 CPI data is due on Friday, January 13. In its Q4 inflation report, published on December 22, the MNB predicted the headline rate at 24.8-27.3% yoy for that month. This looks quite a wide range for a short-term forecast. But the important thing is that it points sharply up again, from the 22.5% yoy actual of November. Most of this big jump, about 2%-points, is to come from the December 6 deregulation of retail fuel prices, and a further 0.5%-points will be due to come from the same source in January. For non-fuel inflation, the MNB's forecast for December implies a 0.5-3% mom range. This is, once again, a pretty safe bet, as the actual was 1.9% mom in November, which is normally followed by a smaller number in December, as retailers want to sell the most possible in the Christmas shopping campaign, unless some extraordinary jump takes place in demand, or a big push is given to consumer prices by costs. However, none of the latter is in sight. Regarding demand, retail sales was up by a miserable 0.6% yoy in volume terms in November. Of this, food & daily household...