Food Price Increase Dramaticly In Hungary

It is, however, worth a look, how Hungary's food prices turned out in an international comparison. We have in deed found some shocking details. The first is that food prices rose by the most in Hungary over the past 12 months. Only Poland was able to get close to the 13% increase, while there was only a single-digit growth in the rest of the countries.

Accordingly, Eurostat data indicate that Hungary tops the price increase rankings in respect of many products, such as bakery goods, meat products, vegetables and dairy products. 



A part of the explanation to this phenomenon is somewhat soothing. The 12 months the index covers is a long period and there have been many changes in Hungary's inflationary processes during this time. For instance, there was a VAT hike last September, which, in theory, should not be in the yr/yr index anymore, but the re-pricing could have been delayed a few weeks in certain areas, so it takes two months for the total VAT impact to filter down. Therefore we can assume that there is a (minimal) VAT impact in the September CPI. Similarly, it also happened at the beginning of this 12-m period that inflation expectations rose considerably (but they moderated again early this year).

Therefore it is worth looking at price changes only over the past four months, when food prices really took off in Europe. The overall picture is much more benign here. Hungary would not be on top of the list in June-September even if overheated Baltic States were removed from the watch list. Once we include these, Hungary is “only" in the top of the upper third.

It is noteworthy, however, that there are several countries where the average food price increase remained subdued despite heavy price increases in individual product segments. These are Hungary's regional peers, such as Slovakia, Poland and the Czech Republic, which all lack the demand crunch Hungary is experiencing.

Our uncertainty may even grow a bit once we take a closer look at the data. It turns out that there are a few considerable price increases “hidden" at certain products behind the moderate price rise in summer and early autumn months. For instance, Hungary tops the price inflation ranking at meat products and is among the top three at bakery products. Hungary is placed high up on the list when it comes to the increase of milk, cheese and egg prices, while analysts claim statistics will not have the main part of the latter item's price hike incorporated before October.

What counterbalances the above factors is a spectacular decline in fruit and vegetable pries. This, however, is not so consoling in terms of inflation outlook, given that it is an “innate" characteristic of these products that their prices fluctuate quite a lot. The plunge in the summer may be put down to the large weight of domestic production and prices can go way up at the end of the season. 

Our uncertainty may even grow a bit once we take a closer look at the data. It turns out that there are a few considerable price increases “hidden" at certain products behind the moderate price rise in summer and early autumn months. For instance, Hungary tops the price inflation ranking at meat products and is among the top three at bakery products. Hungary is placed high up on the list when it comes to the increase of milk, cheese and egg prices, while analysts claim statistics will not have the main part of the latter item's price hike incorporated before October.

What counterbalances the above factors is a spectacular decline in fruit and vegetable pries. This, however, is not so consoling in terms of inflation outlook, given that it is an “innate" characteristic of these products that their prices fluctuate quite a lot. The plunge in the summer may be put down to the large weight of domestic production and prices can go way up at the end of the season."

Source: Portfolio Online Financial Journal