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Wednesday, April 30, 2008

Hungary Producer Prices March 2008

Hungarian producer prices show ``worrying signs'' that rising oil and food costs are making other consumer goods more expensive - that is that the second round consequences of these rising prices are making themselves evident and this alone may prompt the central bank to decide on yet another interest rate increase, economists at Intesa Sanpaolo SpA said this morning.

Prices ``in the consumer goods producing branches show some worrying signs, suggesting that external shocks started to impact a broader range of product categories,'' said the economists, led by Mariann Trippon. They forecast a third consecutive rate increase in this month to 8.5 percent.

Hungary's March industrial producer price inflation was up to 5.7% year on year from 4.9% in February, according to the Central Statistics Office (KSH) last Wednesday. Month on month prices were up by 0.2% in March, down from the 0.7% rate registered in February.

Domestic producer price inflation came in at 10.8% year on year in March (versus 10.6% year on year in Feb and +7.8% in March 07) and in monthly terms it was up by 0.8%, slightly above the increase of 0.5% in the previous month (and the 0.4% for March 2007).

Producer prices in manufacturing industry were up 0.1% month on month and 4.4% year on year, against 0.7% and 3.4% respectively in February.

More disturbingly export sales prices in March rose by 2.0% year on year against an increase of 0.8% in the previous month and a drop of 5.5% in March 2007. Month on month there was a 0.3% decline in export prices, following an 0.8% increase in February and 0.4% increase month on month in March last year.

Food price inflation came to 0.6% m/m (vs. 0.9% in Feb) and 13.8% yr/yr (vs. +13.1% in Feb). On the domestic front food price inflation ticked up to 0.6% m/m from 0.2% in Feb, but increased some in annual terms to 13.0% from 12.5%.

Given that the Hungarian economy is now structurally dependent on exports for growth these increases in export prices are hardly to be welcomed, to say the least.

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