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GDP up 3.2% in Q2, second estimate confirms

Analysis

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Confirming an earlier flash estimate, the volume of gross domestic product was 3.2% higher in Hungary in the second quarter of 2017 than in the corresponding period of the previous year, a second estimate of data from the Central Statistical Office (KSH) shows. The primary contributor to growth was market-based services.

According to seasonally and calendar-adjusted and reconciled data, the performance of the economy in Q2 was up by 3.5% compared to the corresponding quarter of the previous year, and by 0.9% compared to the previous quarter.

In the first half of 2017, the volume of GDP grew by 3.6% compared to a year earlier (the latter figure slightly down from the 3.7% flash estimate).

According to the production approach in KSH figures, the value added by industry grew by 3.0% year-on-year in Q2, within which that of manufacturing grew by 3.6% compared to the corresponding period of the previous year. Within manufacturing, all branches with relatively large weight expanded, with the exception of the manufacture of transport equipment. Within industry, the increase in the performance of non-industrial (e.g. commercial) activities exceeded that of industrial production.

The performance of construction rose by 29% in the second quarter. The highest increase within the division was recorded for civil engineering.

The value added by agriculture decreased by 13% compared to the high base a year earlier.

The gross value added by services was up by 2.8% in total.

The value added by wholesale and retail trade, as well as by accommodation and food service activities, rose by 5.8%.

Services contributed by 1.5 percentage points, industry by 0.7 of a percentage point and construction by 0.8 of a percentage point to the 3.2% growth in GDP in the second quarter of 2017, the KSH concluded.

Expenditure approach

The actual final consumption of households was up by 3.3% year-on-year in Q2 compared to the same period of the previous year, KSH data show. Household final consumption expenditure, representing the largest proportion of the components of the actual final consumption of households, grew by 4.7%, within which volume increases were measured in almost all the groups of expenditure.

Gross fixed capital formation was a substantial, 21% higher than the low base in the same period of the previous year. The volume of investments in construction, and in machinery and equipment, both went up significantly. Investment activity was high in the vast majority of industries and in all industries having relatively large weight.

In the external trade of the national economy, a surplus of HUF 988 billion was generated at current prices in Q2. Exports were up by 3.5% and imports by 5.1%. In trade in goods, exports grew by 4.5% and imports by 5.7%. Within the external trade of the national economy, the exports of services (including tourism) decreased by 0.6%, while their imports went up by 2.3% compared to a year earlier.

Actual final consumption contributed by 1.8 percentage points and gross capital formation by 2.3 percentage points to the 3.2% growth of GDP in the second quarter of 2017. The balance of external trade as a whole slowed down the growth of economic performance by 1.0 percentage point, KSH data reveal.

Growth to pick up in H2?

State news wire MTI notes that the official government projection for GDP growth this year is 4.1%. Analysts interviewed by MTI said they expect growth to accelerate in the second half of the year.

ING Bank chief analyst Péter Virovácz said growth in the second half could come close to or even exceed 4% if consumption is lifted by higher wages and the industrial sector picks up.

K&H Bank senior analyst Dávid Németh put full-year growth at 3.8%.

Erste Bank head analyst Gergely Ürmössy said the National Bank of Hungary (MNB) is likely to keep the base rate unchanged at least until the end of next year, in spite of the marked economic growth. Interbank rates could fall if central bank policy makers continue unconventional easing, he added.

Last Friday, economic research institute GKI raised its GDP growth projection to 3.8% for 2017.

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