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.

Hungarian Employment and Unemployment Drop In Q2

Employment and unemployment both fell in Hungary in the second quarter of 2008. The solution to this othwise brain-baffling enigma is, of course, that Hungary now has an ageing and declining population, this falling unemployment is completely compatible with very low economic growth and large numbers of people leaving the labour force at the upper end in order to retire.

Hungary's unemployment rate declined in the second quarter from the first to a seasonally adjusted 7.6 percent, which compared with the 8 percent registered in the January-March period, according to the national statistics office (KSH) in Budapest earlier today.



The number of Hungarians employed at 3.87 million was up over the 3.84 million in the first quarter but down when compared with the 3.94 million registered in the second quarter of 2007. The last time the number of employed in Hungary was this low during the second quarter was in 2002. The number of employed was down by over 70,000 since end-June 2007, while there were some 20,000 more unemployed and 50,000 more inactive people in April-June than in the same period of 2007.



Thus we find that more than 50,000 people have “disappeared" from the Hungarian labour force in the space of a year.




So the central bank now has a problem, since as people leave the labour market to retire the labour market also tightens, reducing the room for monouevre in reducing interest rates due to the continuing pressure on wages, even as economic growth approaches stagnation point.

Hungary Retail Sales Continue Their Decline In May

Hungarian retail sales fell for the 16th consecutive month in May as government measures to reduce the budget deficit continued to sap consumer spending, forcing in the process thousands of small businesses into closure. Retail sales fell an annual 1.6 percent, after a 1.5 percent decline in April, according to the Budapest-based statistics office.



One consequence of the ongoing decline in sales is that the number of retail outlets in Hungary fell by 3,173 at the end of 2007 to a 5-year low of 162,473 as the smallest shops are forced out of business, according to statistics office data.The number of stores owned by individual entrepreneurs fell by 2,896 last year to 62,794 at the end of December, the lowest since records were started in 1998.

The seasonally adjusted retail index now stands at 137.5, well down from the August 2006 high of 144.6. Given that Hungary now has a rapidly ageing and declining population I see no good reason why retail sales should ever reverse this downward trend (on a longer term basis, obviously there can be month on month rises), so it may well be that 2006 was the historic high point for Hungarian retail sales.