In April, the volume of industrial production in Hungary exceeded the March level by 1.5%, the Central Statistical Office (KSH) reported. The jump in the sector, which was previously in recession, is good news, but it is too early to talk about a reversal in the trend. Industry showed minimal growth of 0.1% in March, with the April data marking two consecutive months of expansion. Slim pickings though these may be, we last saw such an increase in mid-2022.
The production volume in the vast majority of manufacturing sub-sectors decreased compared to the same month of the previous year. Among the most important sub-sectors, there was a decline in vehicle manufacturing, electrical equipment manufacturing, and food, beverage and tobacco manufacturing. The output of computers, electronics, and optical products all expanded, however.
Industry’s April performance is still 2.3% lower than a year earlier, and overall production in the first four months was 4.5% lower than in the same period in 2024.
There was also mixed news from the industry’s most important foreign market, Germany, in April, according to Dániel Molnár, senior economist at economic think-tank GFÜ. He notes that the volume of industrial production decreased by 1.8% on an annual basis and by 1.4% on a monthly basis after the outstanding expansion in March, which thus fell short of preliminary expectations.
Industrial orders in Germany, on the other hand, caused a positive surprise; compared to the expected 1.5% decline, the volume of orders increased by 0.6% on a monthly basis, resulting in a level that exceeded the previous year by 4.8%.
This may have contributed to the fact that German confidence indices have also improved recently; for example, the Ifo Institute for Economic Research’s manufacturing confidence index rose in May to a level not seen since July of last year. However, it is questionable how durable this turnaround will be and how significant a role the stockpiling effect played, with American companies seeking to replenish their inventories before reciprocity tariffs take effect.
As for the outlook for the performance of the Hungarian industry, there is still considerable uncertainty, Molnár says. No agreement has yet been reached between the United States and the EU on U.S. tariffs. Not only is the deadline approaching, but it is also crucial for companies to have clarity as soon as possible.
Industrial performance is, therefore, expected to fluctuate around its current level in the coming months, with a more positive turnaround towards the end of the year if trade tensions ease and global prospects improve, which could be further boosted by large-scale investments (BYD, CATL, BMW) coming online.
According to Erste Bank analyst János Nagy, the outlook for the Hungarian industry is quite mixed: while the most significant export partner, Germany, started the year well, optimism seems to have waned sharply since the escalation of the tariff war.
China’s export restrictions on rare earth metals are already causing significant disruptions in European production chains. At the same time, the development of German manufacturing orders indicates a gradual improvement in the cyclical position; the question is how much Hungarian players can benefit from this.
In March and April, German orders increased by more than 4% overall. In the same period, the level of Hungarian production increased by just over 1.5%, Nagy notes. The global trade conflict and the complex nature of tariffs are causing widespread uncertainty, resulting in a “wait-and-see” approach that may dominate the behavior of players. This will lead to the withdrawal of capital and the postponement of investments and development projects. As things stand, the positive growth effect of capacity expansions may not appear until 2026.
KSH also published its May inflation data. Consumer prices were 4.4% higher on average in May 2025 than a year earlier. Compared to April, prices went up by 0.2% on average. Analysts had expected inflation to remain at the 4.2% level seen in April.
The government has introduced margin caps in several sectors through which it expected to moderate inflation. The fact is that while the margin caps reduced overall food prices by 1.3% in April, they went up by 0.6% in May on a monthly basis. In a year-over-year comparison, food prices rose 5.9% in May (up from 5.4% in April). In other words, food prices rose again despite the margin cap being in place.
After the peak of 5.6% in February, the rate of inflation decreased in March and April, making May’s data a negative surprise. One piece of good news is that core inflation, which is free of one-off effects and therefore better describes inflation processes, has decreased, reaching 4.8% in May. While welcome, this still indicates strong price pressurein the Hungarian economy.
The latest inflation data also suggests that the central bank will likely have no room to maneuver for a possible interest rate easing. That means the current 6.5% base rate, in effect since September 2024, will remain in place for a while.
This article was first published in the Budapest Business Journal print issue of June 16, 2025.
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