HU: Unpleasant GDP surprise

This morning, the CSO published its flash estimate for the first quarter GDP. The actual data brought another unpleasant surprise. In spite of the expected tiny growth, the economy fell by 0.2 percent again on a quarterly basis. On an annual basis, the raw data showed stagnation, while seasonally and calendar-adjusted and balanced data indicated a 0.4 percent decline in economic performance in January-March.

The "zigzag" performance that has been ongoing since 2022 - where each quarter's rise is followed by another decline or declines, and the economy cannot sustain an improving trajectory - continued at the beginning of this year, indicating weak underlying processes and structural problems.

Details are not yet known; they will be published on June 3. The office's preliminary statement was rather brief: The total performance of services positively affected gross domestic product. Industry and construction slowed the economic performance. In other words, the trend characteristic of previous quarters did not change: the weak performance of the production sectors was somewhat offset by services, but this alone proved insufficient for better data.

This also suggests on the final use side, household consumption - which is still driven primarily by the still positive real wage index - could only have supported growth. Low business confidence probably led to further declines in investments, while the weakness of external markets suggests unfavorable export data. Moreover, this data does not yet include the possible negative effects of the trade war, which pose further downward risks to GDP in the coming quarters. We will put our current 1,7 percent annual GDP growth forecast under revision.