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Hungary Economic Confidence Drops to Lowest in Year, GKI Says

Hungary’s economic-sentiment index dropped to a one-year low in May as confidence in industries whose exports pulled the country out of recession unexpectedly plunged, research institute GKI said as cited by Bloomberg.

The index fell to minus 13.2, the lowest since May 2010, from minus 9.1 in the previous month, Budapest-based GKI said in an e-mailed statement today. The business confidence index dropped to minus 4.3 from 0.6 in April while the consumer confidence index fell to minus 38.5 from minus 36.8 the previous month.

Industrial output growth slowed in March, the last month for which data has been published, signaling an uneven recovery from the 2009 recession. Hungary is looking to the euro region, which buys 60% of the products it makes and assembles including Audi cars and Nokia phones, to boost growth.

"The industrial confidence index had an extraordinary plunge," GKI said. "Expectations for industry significantly worsened after two years of almost unabated improvement."

The deteriorating outlook affects all areas of industry and reflects growing pessimism about production and orders, including exports, GKI said. Construction remained the "most pessimistic" area of the economy, while the confidence index for retail and service companies improved marginally, the institute said.

Hungary’s economy grew at the fastest annual pace in four years in the first quarter as rising exports to Germany fueled a recovery from the worst recession in 18 years. Gross domestic product expanded 2.4% on the year between January and March, the most since the first three months of 2007.

Industrial production advanced a workday-adjusted 9.2% in March from a year earlier after growing 14.6% in February. March output fell 3.6% from February.

The GKI indexes are calculated based on a balance of positive and negative answers to questions about the outlook for the economy.