Hungary’s second quarter growth was confirmed at 2.6% y/y when the statistics office KSH released a second estimate on September 6. However, the data also casts some doubt on the economy’s ability to maintain momentum.
The release backs up the flash estimate issued by KSH on August 12, which was met with relief after a collapse in industrial output and investment had dragged GDP growth to a startling slowdown in January-March. The economy contracted 0.8% in the first quarter and 1.1% q/q.
The momentum in April-June was largely provided by industry, in which output spiked in April and May. Industrial production has, however, since sagged back into contraction in June and July. On top of ugly investment data for the second quarter, that only adds to conviction in the market that Hungary will struggle to achieve the central bank’s growth target of 2.8% for the full year.
In adjusted terms, the Q2 growth was a little less impressive at 1.8% y/y, which was 0.1pp higher than the preliminary figure released last month. In quarterly terms, the economy recorded a 1% gain. The second quarter upturn was not strong enough to outweigh the slump in January-March, leaving first half growth at 1.4% y/y.
On top of the push from industry, agriculture and services offered momentum to the economy in the second quarter. That said, financial and insurance services showed contraction, while wholesale and retail trade expanded at 7.7%. That reflects the fact that consumption is still the major driver of the economy, as the tightening labour market and low inflation raise confidence. Construction remains a drag, with public projects having dried up on the back of reduced EU funds in the new 2014-20 budgetary window.
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