Whopping Industrial Figure to Lift Full Year GDP


Following weak end-of-summer data, Hungarian industry caught up in September, basically showing no sign of any negative impacts from the slowing economies in the eurozone. Analysts expect that stronger industry performance in the third quarter will trigger a higher growth rate for the entire economy this year.

Optimistic expectations about August’s sluggish industrial output catching up in the fall have proved right: Hungary’s industry showed a whopping 11.1% growth in September compared to the same month of the past year, while working-day adjusted data took it to 9%.

The satisfying data was published after a mere 0.3% year-on-year increase in August, and except for July’s figure - which was 12% -, this was the highest increase in the volume of the industrial output in the past two-and-a-half years.

Altogether, the Hungarian industry in the third quarter outperformed its achievements of the second quarter, boosting the gross domestic product which, following a 4.9% growth rate in Q2, could well have reached 5% by the third quarter, according analysts.

Industrial output in September, according to seasonally and working-day adjusted indices, was 3.1% above the level of the previous month.

In the second reading, published on November 13, the KSH revealed that the volume of industrial exports grew by 16% year-on-year.

Transport equipment exports, representing a 36% weight within export sales in manufacturing, went up by 29%; the exports in computer, electronic and optical products (accounting for an 18% weight) rose by 26%. Industrial domestic sales increased by 7%, within which domestic sales in manufacturing were 10.2% higher compared to the same month of the previous year.

No ill Effects

Output was 6.3% higher in the first three quarters of this year than in the same period of 2018. Data also suggests that there are, for the time being, no signs of ill effects from the weakening German economy, especially in the automotive sector.

In Hungary, the rate of growth accelerated remarkably in the manufacture of transport equipment representing the largest weight and accounting for 29% of manufacturing: the output exceeded the relatively low production level of the previous year by 22% in September.

The volume of motor vehicle manufacturing went up by 32%; at the same time the manufacture of parts and accessories for motor vehicles rose by 13%.

ING Bank head analyst Péter Virovácz confirmed to news agency MTI that, in spite of the bad news arriving from the manufacturing sector of the eurozone, these figures mean this still hasn’t affected the performance of the Hungarian industry.

The jump in the production can be tied to the acceleration of the automotive industry which kicked off after a summer break. Paired with the electronic industry, it showed robust growth in the last month of the third quarter, he said.

Virovácz emphasized that, in light of the surprisingly strong quarterly performance of the retail sector, and the fresh industrial figures, GDP growth in the third quarter might be higher than previously estimated, and will likely come to near 5%.

Outstanding Performance

Gergely Suppan, head analyst at Takarékbank, also noted the outstanding performance of the Hungarian industry, in spite of the external factors. He predicts a 7.8% growth rate for the third quarter, following a weaker, 4.8% growth rate in the second. He agrees that the GDP growth in the third quarter might be 5%.

As for the full year, Suppan thinks the growth rate for the industrial output will be a little above 6%, following a 3.6% annual growth rate in 2018.

Gábor Regős, analyst at economic research institute Századvég, said that the high volume of investments and the weak data from the base period explain the better-than-expected performance of the Hungarian industry in September.

He also highlighted that the slowdown of the German economy has had no visible effect on Hungarian industrial output, therefore the growth rate of the Hungarian economy might have remained dynamic in the third quarter of the year. He expects strong, albeit not necessarily two-digit, growth rate for industry in the rest of the year.

Although the manufacture of food products, beverages, and tobacco increased at a rate below the industrial average, according to KSH, inflation figures show that October saw significant price rises in alcoholic beverages and tobacco, as well as at food products.

On average, consumer prices were 2.9% higher in October than a year earlier. Analysts say that the inflation rate finally started accelerating in October and might continue to do so until the end of 2019, meaning the inflation might be close to 4% at the end of the year.

It is also worth noting that core inflation, which is monitored closely by the National Bank of Hungary, reached the upper end of its corridor in October, which might trigger the tightening of the still loose monetary conditions.

Numbers to Watch in the Coming Weeks

The KSH will publish labor market data on November 27, referring to the August-October period. A day later, the statistical office will shed lights on the investment volume that was realized in the third quarter of the year. A much-awaited figure will be released on November 29: the KSH releases the GDP growth rate for the third quarter.


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