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Wednesday, July 30, 2008

Hungary Producer Prices Drop Back In June

Hungary's industrial producer prices were down 0.5% month on month in June, against a 1.1% decline in May, according to data from the Central Statistics Office (KSH) this morning. Year on year the rate of increase in the PPI dropped to 4.6% from 4.9% in May. More importantly, domestic price inflation was up at 12.1% yr/yr in June (vs. +11.7% yr/yr in May +7.3% in June 07), while in monthly terms it was up by 0.7%, from +0.3% in May (and +0.3% in June 2007).

So the y-o-y reading indicates the strongest industrial producer price pressure in the Hungarian economy since the beginning of 2004.

Export sales prices were much better behaved, and in June dropped back by 0.8% yr/yr as compared with -0.1% in May and -9.3% in June last year. In monthly terms the KSH reported a 1.4% decline over May, following a 2.2% drop in May and -0.7% m/m in June 2007.

In May, food price inflation came down slightly to 0.2% m/m from 0.6% in May, and to 14.2% yr/yr from 14.7%. On the domestic front food price inflation also decelerated to 0.4% m/m from 0.8% in May, while it remained unchanged at 13.7% in annual terms.

The disconnect between export and domestic prices is begining to become preoccupying I think, since at the end of the day those who work in the export sector still have to purchase their life necessities on the domestic market, and productivity improvements do not come in a bottomless supply, and nor do expectations for a rise in the value of the forint.

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