Inflation decreasing but another wave of price rises to come this summer in Hungary

Although slower than expected, inflation in Hungary is also clearly decreasing. In addition to the moderation in world prices, the significant fall in shop sales also points towards a more moderate price level. However, a new wave of price rises is expected from July.

From July, it is not only the abolition of price caps of food that could bring further price rises in Hungary. Once again, a major global inflationary surge is looming, triggered by a surge in world sugar prices not seen for more than a decade, napi.hu warns.

While many believe that the improving inflation figure will be accompanied by a broad-based fall in consumer prices, this is not the case. The price level, which has now caused a significant fall in demand and a long-unprecedented fall in retail sales, is set to be permanent. The burden on the population can only be eased in the long term by wage increases and hence by an increase in purchasing power.

Official prices are the main reason for the EU-record inflation in Hungary

Prices of food commodities and the main agricultural products have been falling on the world market for months, with consumer prices still less affected. However, there are increasing signs that we cannot calm down. The risk of another global price explosion remains high.

Grocery stores are being forced to act because of falling retail sales, while the purchase price of products with official prices (price caps) has long been much higher than the selling price. As a result, operators are having to absorb heavy losses. The whole product sector holds the price caps responsible for Hungary’s record-breaking inflation in Europe, napi.hu writes.

New wave of price rises to come?

From July, the government is expected to phase out the price caps for real. They will be replaced by compulsory price reductions from June and a price monitoring system to support market competition from July. The lifting of price freezes/official prices in July will lead to more moderate price increases than if the move had been made a few months ago. However, the re-pricing of fixed-price products will still be a major burden.

Decade-long record-breaking price boom could be repeated

Among the official-priced products, the rise in the price of granulated sugar could be dramatic. World sugar prices have not been as high or risen as fast as in recent months for more than a decade. Rising and sustained high sugar prices, just like energy and cereal prices, could lead to another unprecedented rise in food prices.

If the price of sugar rises, the price of substitutes to replace it, which are already much more expensive, will also rise. A global sugar price explosion would affect all food products. The extent of the price increase is not yet foreseeable, but all the signs point to a much higher price level.

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