HU: Inflation increased to 3.7% y/y in November

Consumer prices increased by 0.5% m/m in November, taking the 12-month headline rate to 3.7%. The actual figures practically met expectations. It is favorable that the 12-month core inflation slowed to 4.4% y/y from 4.8% y/y, published for October.

As expected, foods and fuels were the main inflation drivers, rising by 0.9% m/m and 2.4% m/m, respectively. Prices of clothes rose by 0.9% m/m due to fall-winter seasonal effects, while prices of durables decreased by 0.3% m/m, reflecting the Black Friday impact rather than the weaker forint. Gas prices increased by 0.9% m/m in November, due to increased consumption stemming from colder weather. Inflation of services rose just by 0.2% m/m, in line with the usual seasonal pattern. Among services, prices of telecom services remained unchanged on a monthly level, after the almost 7% decline seen in October, showing that general and more permanent promotions by large telecom service providers caused the surprise in October.

As for short-term prospects, inflation is set to increase to (or slightly above) 4% in December on the back of continued increases in food prices and the base effect. Next year, the recent weakness of the forint may appear in consumer prices, while inflation-linked tax changes can also be pro-inflationary. However, inflation of services is set to a greater extent to support disinflation, as wage pressures should not be too strong, given uncertain economic prospects, still low consumer confidence, and a lower minimum wage increase.