Following two months of decline, Hungarian industry returned to growth in August, increasing 11.1% y/y in unadjusted terms, compared to a drop of 4.7% y/y in July, statistics office KSH reported on October 7. Although the August reading represents a record high for the year thus far, it is mainly driven by three extra working days in the month.
Although the ill-effects of the auto sector’s struggle to stabilize have been evident throughout the year, a rebound in industrial production in August – together with an encouraging PMI reading in September – offers glimmers of hope for the Hungarian industrial sector to stabilize. At the same time, calendar-adjusted data shows growth limited to 3.5% y/y.
The three extra work days in August 2016 drove the difference between the raw and adjusted data. The weakness in July was also partially driven by the calendar, with two fewer working days that month. In monthly terms, output increased 1.6% in August.
The results leave industrial output in the first eight months of 2016 2.3% higher in annual terms. KSH will issue a detailed estimate on October 12.
Hungarian industry has shown erratic form this year. While an extended turn of the year slowdown contributed to feeble GDP growth in Q1, an increase in industrial output in April and May helped to push the second quarter economic expansion to 2.6%. At the same time, the struggling carmaking sector dragged on Hungarian industry in June and July, resulting in a drop in industrial output in both months.
While carmaking drove impressive growth in industrial output last year, it is becoming clearer that the potential of the auto segment to unbalance the entire industrial sector is now an issue for Budapest.