Analysts expect CPI-inflation yet higher in April

HUNGARY - In Brief 08 May 2019 by Istvan Racz

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The April CPI-inflation data is due at 9am BUD time tomorrow. Analysts polled by Portfolio.hu expect the headline rate at 4% yoy, rising further from the 3.7% yoy measured for March.We feel this forecast is a little bit exaggerated in the negative direction. We expect +4.5% mom for fuel prices, on the back of a 5.1% mom actual rise by the wholesale prices of fuel, and +0.5% mom for non-fuel consumer prices, the latter the same as the actual was in April 2018. This latter one implies non-fuel inflation staying at an unchanged 3.7% yoy in April. The combination of these two components would make headline inflation of 0.8% mom, 3.8% yoy, the year-on-year rate slightly up from the March actual. For the headline rate to reach the analyst consensus in April, monthly non-fuel inflation should jump to 0.8%, and we do not quite see the factors that would justify such a big jump.Somewhat curiously, the same analysts expect the end-2019 headline CPI rate to be back down at 3.4% yoy, on account of the expected deceleration of the domestic economy. On that horizon, we are much less optimistic than the quoted analyst view, expecting the headline rate at 4.2% yoy, even assuming domestic fuel prices to fall by half-a-percent in each month between now and the end of this year. Our basis for this less optimistic forecast is the combination of the increasingly tight domestic labor market, galloping wages and the MNB's apparent reluctance to do anything serious about rising inflationary pressures.