Hungarian Q3 GDP growth revised up to 3.9%

Analysis

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Hungaryʼs volume of gross domestic product rose an unadjusted 3.9%, or a seasonally and calendar-adjusted and reconciled 4.1%, in the third quarter of 2017 from a year earlier, according to a second reading of data published by the Central Statistical Office (KSH) on Tuesday. The primary contributor to growth, as before, was market-based services.

Both figures were revised up 0.3 percentage points from a first flash estimate published on November 14, mainly due to a better-than-expected performance of market-based services, the KSH said.

On the utilization side, actual final consumption added 3 percentage points to the growth rate and investments added 4.1 percentage points, while net exports reduced the rate by 3.2 percentage points.

The adjusted growth rate was the highest since Q3 2014. Adjusted quarter-on-quarter GDP growth was revised up 0.1 percentage point to 0.9% in Q3, the same as in Q2.

GDP in the first three quarters of 2017 grew an unadjusted 3.8%, and by 4.0% if adjusted for calendar effects, thus reaching 3.9% according to seasonally and calendar-adjusted and reconciled data. The governmentʼs official target for unadjusted GDP growth this year is 4.1%.

Services expanded by 3.8% in Q3 and by 3.3% in Q1-Q3, and contributed the most to GDP growth: adding 2 and 1.8 percentage points to the growth rate, respectively. Within services, commerce, accommodation and catering were the biggest contributors, but the technology and scientific sector, and IT and communications, also expanded quickly. The financial and insurance sector grew by 0.6%, while its performance was neutral to growth.

GDP in public administration, defense, education, health and social services combined dropped, in contrast, by 1.5% year-on-year in Q3 and by 0.6% in the first three quarters, cutting the growth rates by 0.2 and 0.1 percentage points, respectively.

GDP was pushed up by the construction sector, which expanded by about 28% in both periods after a contraction a year earlier, and to a lesser extent by industry and the manufacturing sector, which rose a healthy 3.7% and 4.9%, respectively, in the third quarter, and by 4.4% and 5.4%, respectively, in Q1-Q3, albeit from a relatively low base.

The main branches of the manufacturing sector all expanded except for vehicle manufacturing, the KSH noted. Scheduled shutdowns in vehicle manufacturing could be one factor behind the quarter-on-quarter contraction of industry on the whole, and of manufacturing within it.

Gross value added in agriculture fell more than 10% year-on-year in both comparisons, as the sector reduced the Q3 growth rate by 0.6 and the Q1-Q3 rate by 0.4 percentage points. Agriculture contracted after expanding at similar rates in 2016.

On the utilization side, domestic utilization was the engine of growth with a year-on-year rise of 8.0% in Q3 and 6.2% in Q1-Q3, helped by rising consumption on the back of wage rises and a jump in investments from a low base.

Household final consumption expenditure in Q3 slightly slowed to 4.7%, while actual final consumption growth accelerated to 4.4%. Consumption of households realized in Hungary rose 4.3%, the KSH said.

Gross fixed assets accumulation - investments - jumped by 20.3% year-on-year in Q3, and by 22.7% in Q1-Q3 after the lull between the end of the previous and the start of the new EU financing period pushed them lower in 2016.

Net exports remained negative in Q3, for the third quarter, with import growth, at 9.3%, exceeding the 4.5% growth in exports.

A flash estimate of GDP growth in the fourth quarter of 2017 will be published on February 14, 2018.

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