Hungary's January industrial production lull confirmed

Hungary's January industrial production lull confirmed
While annual output showed a rise of 2.2%, that was still a huge disappointment compared with recent results and expectations.
By bne IntelliNews March 11, 2016

Hungarian industrial production extended a lull in the first month of 2016, statistics office KSH confirmed on March 11.

Output dropped 0.2% y/y on an unadjusted basis, the statistics office reiterated in a follow up to a preliminary estimate released on March 7. While forward-looking data suggest the January fall may be just a blip, a fall of 0.1% m/m in adjusted data was the third monthly decline in a row, suggesting Hungarian industry may be feeling the effects of the slowing Eurozone recovery and reduced EU funds absorption.

While working-day adjusted annual output showed a rise of 2.2%, that was still a huge disappointment compared with recent results and expectations. The reading follows a 6.8% increase in December, while the two-year average is around 7%. Analysts had forecast January would see growth of 5.7%.

The slowdown in the first month of the year matches a sharp drop in the country's purchasing manager index (PMI) in December. The forward-looking survey of factory business conditions showed a rare contraction in outlook in the final month of 2015. However, PMI readings have perked up early this year.

While the locally-compiled Hungarian PMI reading is viewed as erratic and a poor guide to eventual industrial output, the Hungarian PMI dropped below the 50-point threshold in December for the first time in 28 months, and at 49.1 the reading was at its lowest in two and a half years. However, the Hungarian Association of Logistics, Purchasing and Inventory Management (HALPIM), which compiles the survey, insisted the stagnation in the index was a blip.

A return to 53.1 in January, and then a rise to 54.8 in February hints the compiler may be accurate. That offers hope that the lull in industrial production in the first month of 2016 may also prove temporary.

On the other side of the equation, a third straight monthly drop in industrial production does suggest recent rapid expansion of the sector is unlikely to persist. Last year saw average industrial production growth of 7.5%, but output fell 1.4% in November and 0.7% in December.

On top of that, exports out of the biggest manufacturing exports segment are fading, according to the new details released by KSH. Industrial export sales managed growth of just 1% y/y. Out of the two manufacturing subsections accounting for more than half of exports, the auto sector - representing more than one third of manufacturing exports - declined 2.5%.

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