Output of Hungary's industrial sector fell 5.3% year-on-year (link) in August, following a 2.6% decline in the previous month, data released by the Central Statistics Office (KSH) on October 6 show. In July, output dropped 6.1% when adjusted for the number of workdays.
On a monthly basis, production (seasonally and working day adjusted) fell by 2.4%., wiping out the gain in July.
The slowdown of the industry began in Q4 2022 due to lower production in energy-intensive sectors as energy prices surged. In the food industry, weakening domestic and external demand resulted in lower output and the energy sector felt the pain from lower consumption due to mild winter.
The crisis has had little impact on export-oriented sectors, which continue to be the driver of growth for the sector. The export potential of the vehicle and electronics industry dented the decline of the sector, as domestic demand remains weak.
Their outlook is clouded by the deterioration of the external environment and the decline in new orders in the automotive sector.
The KSH said most branches of manufacturing played a role in the decline. Among the biggest branches, output of electrical equipment increased the most, and automotive production grew, too; but output of computers, electronics and optical equipment as well as of food, drinks and tobacco declined, it added. Detailed figures will be released next week.
Industrial output dropped 4.6% y/y in the first eight months.
As inflation moderates and the purchasing power in the domestic economy recovers towards the end of the year, industrial sectors producing for the domestic market may receive some positive impetus not only from the supply side but also from the demand side, ING Bank analyst Peter Virovacz commented
This and the improving outlooks in agriculture could help the Hungarian economy emerge from a technical recession in Q3, he added.
Due to the weak H1 performance of the sector, MBH Bank expects a 2.5-3% decrease in industrial production in 2023, compared to a 6.1% expansion in 2022. Output could significantly rebound in 2024 due to the low base and new capacities coming into operation, and growth could reach 8%.