Steady growth in Hungary's Inflation, industrial production points to strengthening economy

Hungary's industrial production for October 2015 was up 12.7% y/y WDA. This is better than expected reading than a simple average of October outturns since 2000 and the strongest October year-on-year growth rate since that year. The outturn was also significantly stronger than the consensus forecast of 7.8% and resulted in the biggest October forecast surprise since 2001.

Consumer price inflation jumped by 0.5% y/y in November from 0.1% y/y in October, coming in only slightly below the consensus forecast of 0.6%. While core inflation was stable throughout the year and headline CPI has recently turned positive, both measures are currently significantly below the inflation target of 3%.

The significant contributors were a 1.9% rise in food prices, a 3.7% rise in alcohol and tobacco prices and a 2.0% rise in consumer durables prices. The fuel, as well as the electricity and gas categories, remained a significant drag on headline CPI inflation (Figure 4).

"We view the data releases as good news for the economy as industrial output growth was unusually strong for October. Clearly inflation is still well below the target, but if the strength seen in today's industrial output release is reflective of Q3 real GDP growth figures, the MNB may well maintain its monetary policy stance for now", says Barclays.