Hungarian industry's erratic year continued in June, as following two months of y/y growth output dropped back into contraction in June, data from statistics office KSH showed on August 5.

Following a surprisingly extended turn of the year slowdown, Hungary’s industry sector had seemed to return to form in April and May, in unadjusted annual terms at least. However, as the latter month also showed, the ill effects of the auto sector's struggle to stabilize has been evident thoughout the year in monthly industrial production data.

The June result only deepens those worries, showing industry collapsed by 2.4% m/m in the final month of the second quarter. Both working-day adjusted and unadjusted data showed a 0.3% y/y decline, following a 9.2% y/y increase – in unadjusted terms - in May.

On a monthly basis, 2016 began with five straight months of decline in industrial production. The extended turn of the year slowdown – which contributed to feeble GDP growth in Q1 – was mainly due to a drop in the auto sector. Although a 5.4% m/m rise in industrial production in April raised hopes for a recovery, it was followed by a 0.7% m/m fall in May.

KSH will issue a detailed estimate on August 12. The stats office said that production decreased in all segments of industry in June compared to the previous month, the auto sector included. 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.