Abysmal preliminary industrial data for November
The latest figure represents a break from the stagnant trend that has been in place all year. There has been no clear direction for industrial production since the outbreak of the pandemic. A rapid correction followed the huge fall, but the sector has not returned to its previous output trajectory and has been moving further away from it over the past year.
The shutdown of the Nitrogen Works plant may have contributed to the November decline, but this probably does not fully explain the drop. The slowdown in the country's major export markets is certainly reducing demand for Hungarian products, as can be seen from the subdued export figures. A detailed industrial report to be published later this week will give a clearer picture of the precise reasons for the industrial downturn.
The weak figure also means that industry will not contribute to GDP growth in the fourth quarter, with a mediocre December performance dragging down the headline figure by as much as 0.5 percentage points.
The Ministry of National Economy (NGM) also commented on the weak industrial data. In a statement, it said that industrial production is expected to grow again in the coming months. This is based on the development of the domestic and European manufacturing sentiment and purchasing managers' indices, which, according to the NGM, show an improvement in external and internal demand conditions.
Industry's performance in November came as a very big negative surprise, said Péter Virovácz, senior analyst at ING, adding that "Hungarian industry has essentially collapsed on a monthly basis".
"It could well be that the process we have been predicting for months has begun: the impact of the weak global industrial economy may have arrived in Hungary and, as a result, the performance of export-producing sectors may well have started to weaken," he wrote, adding that industrial statistics "suggest that downside risks are starting to emerge from the return to GDP growth expected in the fourth quarter."
The expert's forecast contrasts sharply with the upbeat message from the NGM: "As far as industrial expectations for this year are concerned, last month brought a further deterioration in the outlook. In addition to weakening external demand, which is negatively affecting new order intake in the export segment, the crisis in the Red Sea region is also weighing on the situation."
Cover photo: Getty Images
