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The industry produced a pleasant surprise in July: after more than two years of particularly weak performance, the annual decline slowed to a minimum, while growth was clearly visible on a monthly basis.
According to the latest data released by the Central Statistical Office (KSH), the volume of industrial production in July 2025 lagged behind the 2024 level by just 1%. According to seasonally and working-day adjusted monthly data, industrial output was 2% higher in July than in June 2025.
Production volume decreased in the majority of the manufacturing subsections compared to the same month of the previous year. Of those sectors with the greatest weight in the overall total, an increase was registered in the manufacturing of transport equipment, and of food products, beverages and tobacco products, as well as in the production of computer, electronic and optical products. At the same time, however, output in the manufacture of electrical equipment fell. In the first seven months of the year, industrial production was 3.5% lower than in the same period of 2024.
According to Erste Bank analyst János Nagy, the monthly change is a significant positive surprise: indicators such as the European sales of Hungarian manufacturers or the change in German industrial orders had been anticipated to more likely predict stagnation or even a decline.
However, one cannot yet breathe a sigh of relief: only if the next few months continue to go well can one hope that industry will get itself out of the hole it has been in for years, the analyst cautioned.
Nagy expressed cautious optimism, saying, “One could hardly have dreamed of a better start to the third quarter, but due to the usual summer shutdowns in the automotive industry, the seventh-month data is not authoritative on its own: it can only be meaningfully evaluated together with the August data.”
According to press reports, Suzuki in Esztergom definitely stopped operating in the eighth month, a not-unusual circumstance in slow trade cycles. Looking ahead, it would be difficult to say that the prospects point in any one direction.
On the one hand, a gradual improvement in European business sentiment has been noticeable in recent months, which may have a positive effect on the external demand of domestic exporters. On the other hand, the effective tariff level of the United States for Hungary reached 17% by October, up from around 1-2% at the beginning of the year, which represents a significant loss in terms of price competitiveness.
As of now, of the larger, announced projects, only BMW’s factory in Debrecen (222 km east of Budapest by road) will enter production within the foreseeable future, at the end of this year or the beginning of next, Nagy emphasizes.
Economic think tank GFÜ’s Dániel Molnár is similarly cautious: Although Hungary’s industry started the third quarter dynamically, it is important to consider the summer figures with some reservations, as the timing of regular holiday-period shutdowns at factories can significantly affect the monthly data.
Also, there is still mixed news coming from Hungary’s most important foreign market, Germany. In July, the volume of new manufacturing orders fell by 2.9% from June, which was significantly worse than analysts’ expectations of an expansion. However, large-value orders played a role in the decline; without them, the volume would have shown a 0.7% increase.
“In addition, it is positive that the three-month average also indicates an expansion, meaning that the trend-like improvement has continued, albeit slowly. This gradual recovery is also shown by the economic indices of the German IFO Institute,” Molnár says.
Looking ahead, he does not expect a radical turnaround in the performance of the manufacturing sector. It is certainly positive that the contribution of industry to GDP was able to expand on a quarterly basis in the second quarter, which indicates that the sector may be over the bottom.
“The recovery in consumption and the construction activity starting as a result of the government’s Otthon Start [Home Start] program may bring a recovery in certain segments of the manufacturing industry in the coming months, but the speed of the recovery will definitely be influenced by external demand,” he states.
Molnár adds that any German fiscal stimulus is expected to appear more markedly in the data from the beginning of next year. In parallel with this, the ongoing large-scale investments will also turn productive, giving further impetus to domestic industry and exports.
The KSH also published its August inflation data in early September. Consumer prices increased by 4.3% on an annual basis (the same as in July), which was roughly in line with analysts’ expectations. However, it is important to note that, without the government’s profit margin cap, this figure would have been higher, at around 6%.
Annual core inflation fell to 3.9% from 4% in June, which marks a four-year low. Based on the details of the monthly price changes, prices for the leading group of foodstuffs, which account for more than 30% of the consumer basket, stagnated in August after a previous 0.3% price increase. The price of vehicle fuels decreased by 0.8%. Household energy prices stagnated in August compared to previous months.
This article was first published in the Budapest Business Journal print issue of September 19, 2025.
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