The twelve-month CPI was negative 0.2% in both May and June. Food prices rose by 0.2% after dropping 0.4% in June. The price of alcohol and tobacco products was up by 1.8%. Clothing prices increased by 0.9% and the price of consumer durables was up by 0.2%.

The price of services continued to increase at the fastest pace, by 1.3%. These increases were offset by a 0.1% decline in household energy prices and a 4.9% drop in the category of “other goods” which includes vehicle fuel. Vehicle fuel prices alone were down by an annual 13.0%. Seasonally-adjusted core inflation, which excludes volatile fuel and food prices, was 1.3% in a year-onyear comparison and rose by 0.1% month-on-month.

CPI calculated with a consumer basket of goods and services used by pensioners was 0% year-on-year and down by 0.2% month-on-month. Excluding the effect of tax changes, headline CPI was down by 0.2% both in a year-on-year and month-on-month comparison. In January-July, consumer prices were up by an annual 0.1%.

Deputy state secretary László Balogh said low global oil prices as well as a reduction in the VAT rate on pork to 5% from 27% at the start of the year had kept prices down. If the trend continues, average annual CPI could reach 0.4%, in line with the projection in Hungary’s Convergence Programme, he added.

CIB Bank analyst Sándor Jobbágy put average annual inflation at around 0.5% for this year. Gergely Suppan of Takarékbank projected annual average inflation of 0.6% as the year-end inflation rate climbs to 2%.

Low core inflation suggests wage rises are not creating inflationary pressure, he added.

Republished with permission of Hungary Matters, MTI’s daily newsletter.