January CPI-inflation due tomorrow: upside risks are significant

HUNGARY - In Brief 10 Feb 2022 by Istvan Racz

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Latest monthly readings for the yoy headline rate were 7.4% both in November and December, so that the latter represented a negative surprise. E.g. the MNB expected 7% yoy for December in its Q4 inflation forecast, which was published in the middle of that same month. But private sector analysts (including us) were also negatively surprised. For January, private sector analysts appear to be much more cautious: Portfolio.hu's consensus forecast (median expectation of eight contributors to the poll) is 7.45% yoy. We agree that the headline rate is more likely to move upwards than downwards, because of the very substantial pressure from producer prices, which had not passed through yet until December.For example (a really powerful example, we think), food prices (26.5% of the consumer basket) rose by 8% yoy in December only, whereas agricultural producer prices rose by no less than 27.2% in the year to November. In January, Privatbankár.hu, a local economic news portal did its usual survey, measuring how the prices of a basket of 32 food items in three large retail networks moved. Their result was +3% mom, +17.8% yoy. Even though such a survey cannot be even closely as representative as KSH statistics, we see this as a warning sign that some of the pending pass-through may have taken place in January. However, a similar problem exists with regard to industrial products and imported articles as well.The uncertainty is increased by the existence of a price freeze on fuels, which was introduced on November 15 for three months. One would expect this to simplify forecasting fuel prices, but unfortunately that is not the case. The reason for complication is that only the retail...