Industrial output slowed to 0.6% in October from 2.2% in the previous month, according to the second reading of data by the Central Statistics Office (KSH) on December 10. Adjusted for the number of workdays, output increased by 2.7%. On a monthly basis, output climbed a calendar-adjusted 2.8%, in line with the preliminary figures.

Hungary's industry remained in good shape despite the second wave  of the pandemic. Unlike the retail sector, industrial production has surprised on the upside for three months in a row.

As in the previous months the two sectors accounting for roughly half of the output outperformed the sector's average. Vehicle production, accounting for a third of manufacturing, grew 7.6% y/y and that of computer, electronics and optical equipment segment, with a 13% weight in manufacturing, climbed 10.4%.

The output of food drinks and tobacco producers segment, which accounted for 11% of manufacturing sector output, dropped. 4.5% in October.

There is still enough room for improvement as the latest data on capacity utilisation sits just below 80%, The level of orders, as well as the PMI, paints an encouraging picture at least in the short run, ING said in a note.

The order stock in the sector was 6.5% higher than a year ago, while the volume of new orders went up 4.3%, including a 3.1% increase in new orders and 4.5% growth in new export orders.

Hungary's industry has reached pre-crisis levels and the data also show that the onset of the second wave has not yet had a significant impact on the sector, analysts said. In Q4, the sector could make a positive contribution to GDP by as much as 1-1.5pp.

After double-digit growth in Q3, Hungary’s GDP may contract on a quarterly basis due to weaker consumption and investment data, which may be offset by improving industrial exports, according to ING Bank.

In the first ten months, industrial output contracted 8.2% y/y. The volume of export sales representing 65% of all sales fell by 8.3%, while domestic sales accounting for 35% of all sales declined by 6.3% compared to the same period of the previous year.

The full-year performance of the sector may show a 5.5-6.5% decline followed by a 14-16% expansion in 2021, Takarekbank said.