September inflation: everyone will likely claim to have been right

HUNGARY - In Brief 10 Oct 2017 by Istvan Racz

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CPI-inflation data for September was published this morning. The considerable good news was a marginal drop of the yoy headline rate, to 2.5% from 2.6% in August, in the wake of just 0.1% rise of average prices in September, and a 0.1% monthly decrease of non-fuel prices, leading to an unchanged 2.4% for the yoy non-fuel rate. The similarly considerable bad news was that core inflation was further up to 2.9% yoy from 2.8% in August, on a 0.1% monthly increase, and that the three adjusted core rates, estimated by the MNB with a view to correcting the various deficiencies of the main core rate, all rose as well, to a range of 2-2.6% yoy in September, from a range of 1.9-2.4% yoy in August.CPI-Inflation and Core Inflation (year-on-year data in percent)Sources: KSH, MNBThe way how all of this came about was through a set of monthly data which was remarkably similar to that of September 2016, with only a few differences. Food prices rose by 3.1% yoy but fell 0.1% mom, the latter just the same way as in last September, and fuel prices rose by 2.5% mom against 3% mom in the previous September (a supportive base effect). The combination of these two pulled down the yoy headline rate a bit, away from the core rate. But perhaps more interesting is the case of schoolbooks, where the KSH recorded a 58.7% mom (!) decrease in September, in view of the marked extension of a scheme under which everyone in the first nine classes of elementary and secondary education are granted their textbooks free of charge from now on. This item had a -0.1% impact of the monthly headline rate in September, and even though it is a clear case of a government price subsidy and a one-time event, it count...