The decline in Hungary's industrial sector accelerated to 8.3% year-on-year (chart) in April, following a 4.1% decline in the previous month, extending losses for the fifth straight month.
Output dropped 5.8% when adjusted for the number of workdays and by 2.5% compared to March. This is the steepest decline in Hungary’s industry, a driver of economic growth, since July 2020.
Detailed data will only be available next week, but KSH said output fell in most branches of manufacturing except the automotive industry, the biggest branch with a 25-30% weighting, and production of electrical equipment.
The April data shows that Hungarian industry has yet to recover from losses in Q1, which is bad news for economic growth. Q1 GDP fell 0.9% in annual terms, the fourth lowest in the EU.
The disappointing retail sales data in April, showing a contraction for the fifth straight month, underscores fears that the government’s 1.5% GDP target for 2023 looks overly optimistic. OECD’s latest forecast released on June 7 forecasts flat growth this year.
There is consensus among analysts that the slump could continue in the second quarter and it is unlikely that industry will make a positive contribution to economic growth in Q2.
ING Bank analyst Peter Virovacz said the sector continues to be dominated by contrasting dynamics. The bleak performance of domestic industrial sales, driven by weakening domestic demand, is compensated partially by export sales, ING Bank said.
The outperformance of automotive and EV battery industries, however, cannot fully offset the weak performance of some energy-intensive sectors producing for the local market, Erste Bank added.
MBH Bank said the slowdown in industrial production since the beginning of Q4 is attributed to the slump in production in energy-intensive sectors due to the energy price boom, while in some sectors, particularly the food industry, weakening domestic and external demand is leading to subdued output.
In January-April, output dropped 4.3% year-on-year.
KSH will release detailed data on June 14.