Following a sharp surge in August, Hungary’s industrial output slumped back into decline in September, decreasing 3.7% in both adjusted and unadjusted terms, statistics office KSH reported on November 8.
The September reading extends Hungarian industry’s erratic year, which has been driven by the ill-effects of the vital auto sector’s struggle to stabilize. While a rebound in industrial production in August - together with encouraging PMI readings in September and October - had raised hopes that the industrial sector may be finally set to find its footing again, the drop in September’s output dents that optimism.
The decline in output follows a 11% recovery in August, which represented a record high level in 2016. Like many of its CEE peers, Hungary's August reading was a recovery from extremely weak numbers in July.
Likewise, September data has proved disappointing across much of the region, despite strong signs of recovery in Germany, the bulwark for industry in most countries. In monthly terms - according to seasonally and working-day adjusted indices - Hungarian output decreased 3% in September.
The result leaves industrial output in the first nine months of 2016 just 1.5% higher in annual terms. 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.
While in June and July the struggling car industry was the main culprit for weak industrial output, the rebound in August was fueled by increased output in the auto sector. A detailed estimate to be released by KSH on November 14 will reveal details about the performance of the auto sector in September.
The disappointing performance of Hungarian industry is in line with similar results around the region. Data from several CEE countries significantly missed market expectations, declining sharply month-on-month.
"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."