The MNB received help from tumbling fuel prices in November

HUNGARY - In Brief 11 Dec 2018 by Istvan Racz

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The Statistical Office (KSH) this morning reported November CPI-inflation at -0.3% mom, 3.1% yoy, the latter sharply down from the six-year high of 3.8% yoy, measured in the previous month. Portfolio.hu, the leading economic media domestically, called the news as a major positive surprise, against its own analyst consensus forecast of 3.4% yoy.CPI-inflation and non-fuel inflation (yoy, %)Source: KSH, own estimatesWhat indeed happened was a 4.7% mom drop by fuel prices, which depressed the headline rate against a 0.1% mom rise by non-fuel consumer prices. By the latter, the yoy rate of non-fuel inflation edged down to 2.7% from October's close-to-six-year high of 2.8%, which is good news. But core inflation, as calculated by the KSH, remained unchanged at 2.6% yoy, and the three adjusted core inflation measures, published by the MNB as the ones that are really important from their policy perspective, all rose by 0.1-0.2 percentage points, to 2.7-3.1% yoy. Actually, this was the first time since February 2012 that core inflation by any of these measures exceeded the 3% CPI-inflation target.Headline CPI-inflation and core inflation by various measures (yoy, %)Sources: KSH, MNBTo us, Portfolio.hu's 3.4% yoy analyst consensus appeared a bit too pessimistic, but quite frankly, we also expected 3.3% yoy for the headline rate, on combination of -3% yoy for fuel prices and +0.2% yoy for non-fuel items, the latter being the same as in November 2017. But somewhat curiously, the retail prices of fuel fell faster than wholesale prices, which dropped by 3.7% mom only, and the bigger retreat by fuel retail prices apparently had a deeper cooling impact on non-fuel items. All this gave...