HU: Industry surprised to the downside

Todays industrial output figures surprised significantly to the downside. Volume of industrial output dropped by 4.9% y/y in May, according to the working-day adjusted figures. The unadjusted figure showed a decline of 5.2% y/y in May. What is disappointing that on monthly level, the output further dropped by 1.1% - despite the expected slight increase.

Details of the figures are not available yet and will be released on July 12. According to the CSOs usual short comment, production volume declined in most of the manufacturing subsections on yearly level. Out of the subsections having the largest weight a fall was observed in the manufacture of transport equipment, in the manufacture of electrical equipment, as well as in the manufacture of computer, electronic and optical products, while the manufacture of food products, beverages and tobacco products increased.

The above comment says that the overall picture has not changed. The reason for the bad performance of the sector is the lack of external demand, particularly affecting vehicle manufacturing and strongly burdening the output, due to the sectors relevant weigh in industry and the domestic economy. As a result, industry might have been a negative GDP contributor again in 2Q24.

All in all, we cannot expect any substantial recovery in the sector, until the European export markets show more spectacular revival. From this prospects, continued weakness of the German industry is a negative signal, though PMI indexes already show some weak signs of a revival. Moreover, as Hungary had relevantly increased its capacities in EV battery production, it is particularly unfavorable that the transition process to electric cars has slowed recently.