Hungary's economy in a terrible state, GDP drops 7.2% yr/yr, 1.8% q/q (2)

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Hungary's gross domestic product dropped by 7.2% year on year in the third quarter of 2009 versus a decline of 7.5% in Q2, according to first estimate figures adjusted by calendar impacts, released by the Central Statistics Office (KSH) on Friday. On a quarterly basis, output shrunk by 1.8%.

The market expected a 6.6% yr/yr decline and an 0.6% contraction on a quarterly basis.Some of the analysts in Portfolio.hu’s poll projected a q/q growth that technically would have meant the end of recession in Hungary. The fresh data, however, is greatly behind the consensus, indicating that recession has been in full swing for a year now.

Given these are only the preliminary figures, we can only guess what is in the background of the negative surprise. On the production side, the industry has probably contributed to growth positively, while the construction sector, which has a much smaller weight in the index, most likely dragged the headline data downward - at least this is our beast interpretation of the monthly volume indices.

There is no information whatsoever on the biggest sector, services, but the dim GDP print hints that recession remains extremely deep in this demand-sensitive segment. (Financial services were probably among the worst performing segments here.)

Looking at the data from the consumption side we are safe to say the huge gap between export and import growth is worth less than the Zimbabwe dollar if its engine is a stunning decline in consumption that abolishes this impact. Inventory unwinding was likely less vehement than the more upbeat analysts projected, and in view of the GDP reading we should lose whatever optimism we have had about the investment index.

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