Non-fuel inflation keeps rising slowly despite the falling headline rate

HUNGARY - In Brief 10 May 2017 by Istvan Racz

---

The yoy headline rate of CPI-inflation fell again in April, this time to 2.2% from the 2.7% recorded in March, and from 2.8% in February, which was the highest reading in the series since January 2013. Thus the movement of the headline inflation rate has become quite hectic, due to fuel prices, which, unlike the prices of other types of energy, are repriced in sales to domestic consumers very flexibly, following the frequent and erratic ups and downs of world market prices and of the USDHUF exchange rate.Importantly, core inflation remains very much more stable than the headline rate. But unfortunately, there are currently no less than five various officially calculated core inflation series, and arguably, no one who has five watches can find out the actual time very easily. At any rate, the various official core inflation series were reported in the 1.5-1.9% yoy range in April, which followed 1.5-2% yoy in March, marking essentially no change last month.CPI-Inflation, Fuel and Non-Fuel Inflation (yoy data in %)Note: December 2011 - April 2017: actual, May 2017 - December 2018: forecastSources: KSH, own estimates and forecastHowever, without aiming to make things more complicated (but indeed more simple instead), our preference for a core inflation measure is a sixth series, which is non-fuel inflation, with a view to excluding the single biggest item that causes volatility (of mainly non-domestic origin). Still in yoy terms, non-fuel inflation rose to 1.6% yoy in April, from 1.5% in March, 1.3% in December and a 0.7% yoy cyclical low in June 2016. In other words, non-fuel inflation keeps rising from month to month in a rather stable way but at a moderate speed.We curr...