Wonder? Hungarian inflation below psychological barrier!
The government has overcome obstacles to cutting inflation and reduced it to single digits ahead of time, Marton Nagy, the economic development minister, said on Friday, commenting on Central Statistical Office (KSH) data showing that Hungary’s annual consumer price index fell to 9.9 percent in October.
Nagy said sanctions and price speculation by multinationals had rocketed inflation upwards and the central bank alone lacked the tools to deal with it. So the government took over responsibility for fighting inflation, he added, noting measures such as mandatory price cuts and an online price monitoring system.
CPI for pensioners dropped to an even more favourable 9.1 percent, he noted.
The price of food fell by 0.1 percent compared with the previous month and the price of household energy by 0.3 percent.
Also, the ministry’s talks with the Hungarian Mineral Oil Association led to more competitive fuel prices, with the price of vehicle fuels dropping by 3.8 percent, he noted.
Nagy said there was now a fair chance of real wages growing again from September, and the government would maintain support for wage increases with the aim of 4-5 percent wage growth next year, and a knock-on target of higher consumption.
The minister said 2023 was the year “to break inflation” and 2024 would be the year to “restore growth”.
Hungary CPI falls into single digits
Hungary’s consumer price index fell to 9.9 percent in October, the Central Statistical Office (KSH) said on Friday. Food prices grew by an annual 10.4 percent in October, slowing from a 15.2 percent increase in the previous month. Household energy prices fell by 16.1 percent, while consumer durable prices edged up 0.7 percent.
Prices in the category of goods that includes vehicle fuel increased by 16.5 percent. Prices of spirits and tobacco products increased by 11.6 percent and clothing prices by 7.8 percent. Harmonised inflation calculated for better comparison with other European Union member states was 9.6 percent. Core inflation, which excludes volatile fuel and food prices, was 10.9 percent. CPI calculated with a basket of goods and services used by pensioners was 9.1 percent. Month on month, consumer prices edged down 0.1 percent.
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I’m quite encouraged by these improved inflation statistics. The Forint has appreciated considerably lately. If you look at Euro/Forint we are back at the rate as existed at April 8th, 2022. That means that as far as imports are concerned there is no inflation as a result of currency depreciation but actually now deflationary effects from currency appreciation (The flip side is more difficulty for exporters). This also gives the Hungarian central bank room to cut interest rates to get much needed economic growth moving in Hungary but the central bank has to be gradual. 2024 should be a better year. 2023 has been really hard for Hungarians.
Let’s look at this in context:
https://www.bnnbloomberg.ca/hungary-s-inflation-dips-below-10-in-boost-for-more-rate-cuts-1.1996726
“Hungary’s inflation rate, the highest in the European Union, …”
https://tradingeconomics.com/country-list/inflation-rate%20-?continent=europe
Nothing quite like seeing your country’s name right up there. No need to scroll!
Due to lag effects Hungarian year over year inflation continues to show higher that the rest of the EU but with a narrowing gap. What is most important to note is that month over month inflation for the past six months has averaged almost exactly in-line with the EU average. The EU had 1.1% over the past six months (2.2% annualized) while Hungary had 1.2% (2.4% annualized). High inflation is now over but the hangover effect is the drop in real purchasing power and the expectation of workers for wage increases to catch up.
https://tradingeconomics.com/hungary/inflation-rate-mom
https://tradingeconomics.com/euro-area/inflation-rate-mom