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Tuesday, September 4, 2007

Hungary July 2007 Producer Prices

This report is now a little dated but still, I think it is interesting to put the industrial output numbers in some kind of perspective, and especially the export component. According to KSH, Hungary's industrial producer prices were down by 2.8% year in July 2007 year on year. Export prices were up 0.6% m/m despite a stronger exchange rate in July, while the increase in the price index in domestic sales moderated to 0.1% m/m from 0.3% in June.
Obviously the downward trend in domestic producer prices mirrors the weakening in domestic demand, and this offers support to the disinflation process. Prices of domestic food processing industry sales showed the only outstanding price increase (0.8% m-o-m), while prices in other major manufacturing remained flat.

Prices for export sales still reflect a significant process of deflation, with the y-o-y data showing a drop of 9.9%. The m-o-m figure however is already reflecting the recent HUF weakening, and showed a 0.6% rise, the highest for more than year.

The consumer good component of the PPI - which to some extent correlates with the CPI number dropped y-o-y to 3.7%, but the m-o-m figure was 0.6%, which could constitute a warning signal - especially on the back of June's 0.4% - that the near-zero m-o-m rates achieved during the first five months of the year are now over.

Domestic price inflation for food products was 7.1% yr/yr, which was down from the 7.5% June number and the 7.6% May one, hence the short term CPI outlook may be holding steady.

Here is the chart for m-o-m changes in domestic sales prices and export prices:

and below are the year on year changes.What we can observe is that there is now a very strong disinflationary process at work.

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