Following a turn of the year slowdown, Hungary’s industry sector continued its return to form in May, in unadjusted annual terms at least, statistics office KSH reported on July 13, confirming its preliminary estimate. However, in monthly terms output looks anything but solid as the auto sector continues struggling to stabilize.

Unadjusted industrial production grew 9.2% y/y in the fifth month of the year, following an 5.3% y/y increase in April. However, on a working-day adjusted basis, growth showed a less impressive 4.2% gain, on a monthly basis production decreased.

The 0.7% m/m fall followed a 5.4% rise in April. However, that was preceded by five straight months of decline. The extended turn of the year slowdown in industrial production – which contributed to feeble GDP growth in Q1 – was mainly due to a drop in the auto sector.

While KSH’s detailed second estimate showed that performance improved in all segments of industry in May - save for mining and quarrying – it extends concern over the recovery of the auto sector. Following an encouraging growth of 12.2% y/y in the previous month, growth in the manufacture of parts and accessories for motor vehicles slowed to 1% in May.

At the same time, new export orders of motor vehicles dropped by 12.6% y/y versus a 10.6% increase in the previous month. This suggests that the April pick up was a blip, and the segment is still struggling to escape from the extended turn of the year slowdown, which was partly due to technical switchovers at Audi and Suzuki in the first quarter.

Carmaking drove impressive growth in industrial output last year. However, it is becoming clearer that the potential of the auto segment to unbalance the entire industrial sector is now an issue for Budapest.