Hungary's imports soar in Feb, balance shows EUR 374 m surplus (2)

(Adds Portfolio.hu viewpoint)
Hungary has posted a trade surplus of EUR 373.6 million in February, up from EUR 290 m in January and EUR 296 m in February 2009, the Central Statistics Office (KSH) has reported on Thursday. While the size of the monthly surplus is not unusual, the overall picture is a bit different this time.

The balance of the first two months shows a EUR 664 million surplus, against EUR 95.9 m in the same period of 2009. The fresh figure really stands out.

February was the 13th consecutive month when Hungary posted a surplus in its trade balance, the 12-month trailing data also shows an immense surplus of EUR 4.55 bn.

We need to consider, however, that last January was an extraordinary month and the sharp adjustment process kicked in only afterward. If you take a closer look you can see that the gradually improving trend in the trade balance has clearly lost steam in February.

The reason for that is that the gap between export and import growth, which widened to a record of 11.9 percentage points in January, shrunk to 0.6 ppt.

This is not bad news at all, for two reasons. Firstly, export dynamics remain unfazed. The last time we have seen an 18% yr/yr growth was about 18 months ago.

Exports in February totalled EUR 5,252 m, a rise of 18% year on year, up from 14.6% in January. According to the statistics office, 79% of exports were directed to European Union member states in February.

Imports, 68% of which arrived from the bloc, amounted to EUR 4,878 m, an annual growth of 17.4%, sharply up from a growth of 2.7% in the first month of the year.

The other reason why we say the shrinkage of the export-import gap is not bad news is because we consider the jump in import growth, albeit from a low base, a favourable development. In such a heavily recessionary environment, import growth can imply that the economy is waking up. Import is used basically for three things:

(1) it can satisfy the need for capital goods. We find this unlikely in this case, because capacity utilisation is low and corporates presumably have not started this kind of activity yet.

(2) it can serve the replenishment of stocks. It’s a telltale sign of optimism from the part of coporates if they are buying import goods for export activities later on.

(3) it can signal a pickup in consumption. The current forecasts are rather forlorn about households’ purchasing propensity this year, but the first real wage and retail trade numbers may be interpreted as a hint that the situation is better in this regard than what the estimates show.

Needless to say, any assumption made of the preliminary trade figures must be taken with a pinch of salt. But if the improvement in the trade balance stops while export dynamics remain high, it should be regarded as a good sign because of the aforementioned factors.

• Tags:
• economy