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Hungary Inflation September 2023

Hungary: Inflation falls to over one-year low in September

Inflation eased to 12.2% in September, following August’s 16.4%. September’s figure marked the weakest inflation rate since June 2022. Looking at the details of the release, prices for clothing and footwear were flat in September, while prices for food and non-alcoholic beverages decreased at a sharper rate. Meanwhile, housing and energy prices declined at a faster pace.

In addition, the trend pointed down, with annual average inflation coming in at 31.5% in September (August: 32.4%). Meanwhile, core inflation fell to 13.1% in September, from August’s 15.2%.

Lastly, consumer prices increased 0.37% from the previous month in September, swinging from the 49.65% fall logged in August.

Commenting on the release, Peter Virovacz and Dávid Szonyi, economists at ING, stated: “Core inflation has averaged 0.1% MoM, which is lower than would be needed to reach price stability over the monetary policy horizon. Thus while headline inflation looks like a red flag, core inflation provides some hope. We are not saying the job is done, but the underlying inflation performance is encouraging, while non-core items are responsible for the recent generally strong repricing. […] Next year, however, we expect average inflation to be slightly above 5%, with upside risks. Fuel price increases could continue, and the second-round effects of tax changes already enacted and yet to come, as well as the expected dynamic real wage growth, all pose inflationary risks. In addition, the Israeli-Palestinian war carries the risk of increased risk aversion, affecting not only energy prices but also the forint, thus adding further pro-inflationary risks. Another factor that suggests we can’t relax is that retail price expectations have been somewhat stronger recently, a warning sign of a possible reacceleration in core inflation.”

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