Inflation rose further in February: an administrative ceiling comes on retail trade margins for a set of basic food items

HUNGARY - In Brief 11 Mar 2025 by Istvan Racz

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Headline CPI-inflation in February was reported at 0.8% mom, 5.6% yoy this morning, the latter up from 5.5% yoy in January. Core inflation looked bad as well, at 0.6% mom, 6.2% yoy, the latter up from 5.8% in January. Non-fuel inflation, which we estimate from the official KSH data, was 0.9% mom, 5.6% yoy, also up from 5% yoy in the previous month. Fuel prices actually fell 0.9% in February, whereas food and services both went up by 1.2% in a single month.Note: Year-on-year changes in percent; Sources: KSH, own estimatesPortfolio.hu claims that the median expectation of its monthly analyst poll, prepared in the past few days, was 5.3% yoy for the headline rate. So, analysts expected decreasing inflation and were surprised by the opposite move. Minister Nagy, apparently familiar with the KSH data prior to their release to the public, said yesterday that February inflation was going to bring about another negative surprise. Looking at the MNB's Q4 inflation report, which was published in late December, the picture there appears to be similar: the Bank predicted only 0.3% rise in the CPI for February, and they expected the same 0.3% rate of core inflation, both much lower than actual.But, once again in hindsight, is it really such a big surprise that inflation accelerated further last month? Well, now we know from the detailed GDP data that households' purchased consumption grew by 5.4% yoy in unadjusted volume terms in Q4 2024, which is quite robust in our view, creating plenty of opportunity for prices to rise. In fact, the Q4 deflator of purchased consumption (something like PCE-inflation in the US) was 6.9% yoy, in stark contrast with the 3.8% yoy average CPI-inflatio...