HU: Weak year-end performance of industry

The volume of industry dropped by 6.4% y/y in December, according to the working day-adjusted statistics. The actual figure came as another negative surprise, being much weaker than our estimate and the Bloomberg consensus. The unadjusted figure was slightly more favorable (-5.3% y/y) due to a higher number of working days in December 2024 compared to December 2023. Another huge disappointment was that, on a monthly level, the output further dropped by 1.8% (swda). Apart from the generally weak demand, this was due to the winter break at the Mercedes factory in Kecskemt. In FY 2024, industrial production declined by 4% annually. 2024 was the second consecutive year when the domestic industry plummeted and negatively contributed to GDP.

Regarding the December figures, more details on the structure will be released on February 13. According to the CSOs usual short comment, out of the manufacturing subsections with the largest weight, output in the manufacture of transport equipment and electrical equipment decreased. At the same time, the manufacture of computer, electronic, and optical products, as well as food products, beverages, and tobacco products, grew.

The short-term outlook is still not favorable. Vast majority of indices measuring the sentiment of the Eurozone and in Germany have been stagnant for a year, with hardly any significant change in January. In parallel, the process of electromobility has also slowed down, and there are no signs of a relevant upturn in the coming months. In the medium term, some more optimism is justified, however, as significant capacity expansions entering production mainly in the automotive industry and battery production may result in a substantial recovery in output, with larger volumes starting from the second half of the year. Although huge volumes are planned, due to weak external demand, it gives reason for only moderate optimism for this year. Positive impacts of capacity expansions may rather appear from 2026.