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Scale of drop in household consumption surprises analysts

Revised GDP data for Hungary in the first quarter show a bigger than expected drop in household consumption, analysts told MTI on Thursday.

The Central Statistical Office (KSH) revised the headline figure for year-on-year GDP growth in Q1 to 2.5% from 2.4% in a second reading published early in the day. The data show household spending fell by 0.8%.

Gergely Suppan of Takarékbank said the drop in household consumption was slightly bigger than expected, while farm sector output and accumulation of inventories exceeded expectations a bit. This does not change the fact that the sole engine of growth remains exports and exporting manufacturers, he added.

Suppan put full-year GDP growth as before at 3%, projecting year-on-year rates of 2.8% in Q2, 3.0% in Q3 and 3.8% in Q4. Growth will be supported by the base effect, increased manufacturing sector capacity and, from the second half of the year, growing domestic demand, he added.

Erste Bank's Zoltán Árokszállási also noted the continued weak household demand. The effects of tax cuts introduced at the start of the year have yet to be seen, though payouts of real yields on private pension assets in the summer could give household consumption a boost, he added.

He put full-year growth at 2.7% for 2011 and at more than 3% for 2012.