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July drop in industrial output only a hiccup, say analysts

In spite of a month-on-month drop in industrial output in July, analysts asked by MTI said companies' expanding stock of orders show the headline figure should continue to grow in the coming months.

Industrial output fell a seasonally- and workday-adjusted 1.1% in July in a month-on-month comparison, dropping for the first time since February, the Central Statistical Office (KSH) said early Wednesday. Output climbed 11.5% year-on-year, according to workday-adjusted data,

Takarékbank's Gergely Suppan said the rising stock of new orders augurs higher month-on-month output in the next month or two, while the year-on-year increase will stay in the double digits. Year-on-year output is likely to pick up to 12.5% in August, before slowing to 8-9% in September-November because of the base effect. But a low base in December, as well as capacity expansions at the local units of companies such as Bosch, Hankook and Huawei, will probably lift growth over 14%, he said.

Zoltán Török of Raiffeisen Bank said the pace of industrial output was interrupted in July not only in Hungary, but in several other countries in Central and Eastern Europe. Exports - especially in the machinery and automotive as well as the electronics sectors - continue to be the engine of growth in the sector, but the July data show domestic sales rising for the first time this year in a year-on-year comparison, he added. He conceded, however, that the increase was probably due to imports of content that will later be exported as domestic demand continued to fall. The base in July 2009 was also extremely low, he said

Export orders are continuing to grow, even if a slowdown in external demand is possible in the next few quarters, he said.

Efficiency in the industrial sector is improving as companies draw on their “reserves” of staff; that is, those people who were not laid earlier as it would have been more costly to re-hire them later, Török said.

Török put year-on-year industrial output growth at 5-10% in the coming months and at 7.5-8% for the full year. (MTI – Econews)