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Q3 GDP show signs of weak export-based recovery

The year-on-year fall of Hungary's GDP slowed to 7.1% in Q3 from 7.5% in Q2, the Central Statistics Office (KSH) said in a second reading published on Wednesday. The data show some signs of a weak recovery, mostly affecting export-related branches. In GDP by use, net exports and an increase in inventories -- after steep drops in the previous two quarters -- tempered the drop in domestic consumption and investments.

Q1-Q3 GDP fell an unadjusted 7.1% and a calendar-adjusted 6.9% in Q1-Q3 from the same period a year earlier. The figures compare to a government projection for a 6.7% contraction for the full year.

In a quarter-on-quarter comparison, Hungary's seasonally- and calendar year-adjusted GDP dropped 1.8% in Q3, slowing from 2.5% in Q1 and 1.9% in Q2. In a quarter-on-quarter comparison, the economy contracted for the sixth quarter in a row.

GDP from goods-producing sectors fell 15.4% in Q3 in a twelve-month comparison, but a quarter-on-quarter comparison already reflects improvements. A four-quarter decline in the farm sector came to a halt in Q3. And the industrial sector expanded 1.3%, including a 2.3% rise in added value in the manufacturing sector, after contracting each quarter since Q2 2008.

In a year-on-year comparison, Q3 figures still show a 17% contraction in the farm sector, albeit from a high base, and a 15.6% drop in the industrial sector, including a 15.5% contraction of the manufacturing sector. All of the declines, however, slowed from Q2.

The construction sector contracted by 1.3% in Q3 in a quarter-on-quarter comparison after expanding 0.5% in Q2. On the year, the sector contracted 3.2% because of a slowdown in home building. Civil engineering projects grew during the period, reflecting work on Budapest's new underground line and motorways.

The year-on-year decline in services, ongoing for the sixth quarter, slowed to 2.6% in Q3. The contraction of trade and the tourism-related branches accelerated to 11.4% and the fall in the transport, storage and telecommunications sector slowed to 3.4%. In a quarter-on-quarter comparison, the decline deepened in trade and tourism and leveled out in the transport, storage and telecommunications sector.

The financial, real estate and economic services sector grew 1.2% in a year-on-year comparison and expanded 0.8% in a quarter-on-quarter comparison. The rise came, however, from the so-called economic services, as both banking and insurance activities declined, the report said.

KSH attributed a 1.1% contraction in public administration, education and health services to a fall in non-government sponsored education.

Exports fell 6.9% in Q3 from the same period a year earlier and imports were down 14.6%, but both rose -- imports for the first time since Q1 2008, and exports the second time in a row -- in a quarter-on-quarter comparison. Exports of goods fell 8.8% while that of services rose 1.1% yr/yr. Imports of goods fell 15.9% and services imports fell 8% yr/yr. The contribution of net exports to growth remained high. The fact that the 4.7% rise of imports from Q2 exceeded the 3.1% rise in exports could be interpreted as a sign of a pick-up considering the high import content of Hungary's exports. Exports fell less than imports or even rose (in Q2) in a quarter-on-quarter comparison between Q3 2008 and Q2 this year.

Inventories rose, by the equivalent of 1.8% of GDP in Q3, after sharp declines in clear recession sign in the previous two quarters. The rise was mainly the result of a (seasonal) rise in agricultural stocks as well as increasing stocks in the trade sector, KSH said.

Household final consumption fell by 8.8% in Q3 from the same period a year earlier and was down a sharp 2.7% in a quarter-on-quarter comparison as household spending fell an unprecedented 9.8% year-on-year and 3% quarter-on-quarter. Spending related to transport (including spending on cars), culture and post-graduate education fell more than the average, KSH said. In-kind transfers from the government and from non-profit organizations fell below the average in a year-on-year comparison but transfers from non-profit organizations rose 0.9% from Q2. Government current consumption fell 1.4% in Q3 from the same period a year earlier and fell a slight 0.1% on the quarter after moderate quarter-on-quarter rises in Q1 and Q2. As a result, the drop in final consumption accelerated to 7.9% in a year-on-year comparison and to 2.3% in a quarter-on-quarter comparison.

Gross capital formation, an approximation of investments, were down 6.8% year-on-year and dropped 1.7% quarter-on-quarter, accelerating from declines in Q2.

Q3 GDP use figures show a large, 4.6% of GDP negative statistical discrepancy. (MTI-ECONEWS)