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Saturday, March 01, 2008

Hungary Producer Prices January 2008

Hungary's industrial producer prices were up 3.0% month on month in January following on the heels of a 0.4% rise in Dec 2007. The increase was 4.3% year on year in comparison with a 1.6% growth in December according to data released by the Central Statistics Office (KSH) yesterday.

Domestic sales prices were up vy 5.0% m/m and 10.8% y/y from 6.2% in December while export prices were up 1.5% m/m and still decreased (but only just) y/y at -0.5%. If we look at the chart below the upward tren in producer prices is clear enough. Most preocuppyingly the level of export prices is now feeling the attrition.

While we are still in negative territory year on year with the exports prices, unless there is a reversal of the trend we are about to go positive as of next month. In fact, as you can see in the chart below, export prices have effectively been rising since April, and they are now up 3.3% since March.

Obviously, and unfortunately, we now look set to see more of this. The internal inflation process is now just too much for productivity gains to absorb. Of course global oil and food prices don't help any either, but the point at the end of the day is that with domestic demand in the condition it is, Hungary has no alternative but to export to grow, and with these relative price tendencies this would seem to be very hard work indeed.

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