The ongoing struggle of the vital carmaking sector to stabilize, together with a decline in other important subsections, dragged on Hungarian industry as output slumped back into decline September, data from the statistics office KSH showed on November 14.
Overall output dropped 3.7% y/y in September, confirming a flash estimate from a week earlier. The fall dents optimism that industry may have been finally set to find its footing again that was raised by a rebound in industrial production in August, and encouraging PMI readings in September and October.
The ill-effects of the auto sector’s struggles have been evident throughout the year. In September, the production of transport equipment – representing 32% of Hungarian manufacturing output – declined 0.6% y/y. The manufacture of motor vehicles dropped 4.1%, while output of parts and accessories rose 2.7%.
Carmakers were not the sole culprits, however. The manufacture of computer, electronic and optical products – having the second largest weight in manufacturing output – dropped 0.6%. The manufacture of machinery and equipment fell 25%. The pharmaceutical sector also disappointed with a drop of 13.4%.
On top of that, the short-term outlook does not look much brighter. The total number of new orders declined 0.1% in September compared to the same month last year. That said, new export orders for motor vehicles increased 5.3%.
The disappointing performance of Hungarian industry in September is in line with similar results around the region. Data from several CEE countries significantly missed market expectations, declining sharply month-on-month in the ninth month of the year following rebounds in August from a summer lull.
"This stands in sharp contrast with a noticeable improvement in last month’s PMI readings from the same countries as well as strong German Ifo readings," note analysts at Commerzbank. "These latest hard data are likely to pressure consensus growth forecasts downwards and could make central banks return to a dovish stance."