Following the somewhat disappointing second-quarter GDP data, it was clear that the monthly statistics for June would not be strong. It seems that Hungarian industry cannot escape its usual pattern of one good month followed by one bad month. We had hoped this trend might be broken this time, but that did not happen. In June, production fell by 1.4% month-on-month, which was a negative surprise even given the wide range of forecasts. The year-on-year index, adjusted for working days, was also significantly lower than the previous month's figure. However, the growth rate of 4.1% is not bad in itself. This is not least because the negative correction in June was smaller than the surge in the previous month. Based on all this, it can still be said that a positive trend has been in place since the end of 2025.

Thanks to this positive trend, the sector’s production volume in June was just 4% below the 2021 average. This is in line with the average performance of 2024, suggesting that a degree of optimism may be justified.

As this is preliminary data, the HCSO has not yet released many details. Yet even based on the brief commentary, a generally positive picture emerges, particularly with regard to the year-on-year indices. Production volume increased in the majority of manufacturing subsectors. The HCSO specifically highlighted the three most significant sectors by name. It is perhaps no longer surprising that production expanded in the electronic and optical products and manufacture of transport equipment. This reflects the surge in production linked to the AI boom and the increase in vehicle manufacturing capacity. Battery production also appears to have passed its low point, having shown growth too.

Soft indicators also point to the continuation of this sustained positive trend. For the first time in three months, a slight majority of manufacturing companies intend to hire new staff in the coming months. Furthermore, there are signs of improvement regarding the expected development of order books. Expected capacity utilisation for the third quarter has also risen significantly, approaching a rate of 79%. Given these developments, it is perhaps not surprising that the aggregate industrial confidence index value for July stands at a peak not seen since summer 2022.

Looking ahead, we expect industrial activity to be significantly affected by production cuts stemming from the energy crisis caused by low Danube water levels, which are reducing the electricity generation capacity of the Paks Nuclear Power Plant. Accordingly, we expect to see negative figures as early as late July, but even more so in the August data. However, if a complete shutdown at Paks can be avoided, there is a chance that recovery could begin as early as autumn. As there is still scope for manufacturers to increase capacity utilisation, it may be possible to make up for lost production in the remainder of the year once the energy crisis ends. For this reason, despite the current crisis, we believe that the fixed-base index could reach, and even exceed, the monthly average for 2021 by the end of this year. Therefore, the full-year performance for Hungary's industry could average growth of around 3–4% in 2026. In other words, after three years of industrial recession, the manufacturing sector could once again contribute positively to the overall performance of the economy, despite the Paks crisis.