Bad streak not over, Hungary's industry continues to show dreadful performance

In six of the past ten months, Hungary's industrial output has contracted or stagnated compared to the previous month, so it is no wonder that production (adjusted for calendar effects) was 4.1% smaller in August than a year earlier.

Given this, it is almost good news that the last three months as a whole have not brought any further downturn in a sector that has been in recession for almost two years, but the August decline does spoil the optics on this.

In the light of the July-August data, it can already be said that the third quarter did not bring a meaningful turnaround in the industry. Although detailed data will only be available next week, the Central Statistical Office (KSH) has reported that on an annual basis, output fell in the vast majority of manufacturing sub-sectors in August 2024. Output increased in only three sub-sectors, with the largest increase in the manufacture of chemicals and chemical products.

We estimate that industry could also have had a negative impact on GDP growth in the third quarter. Compared to the previous quarter, the sector is unlikely to contribute to economic expansion, and on an annual basis it will be a marked drag on growth, with a contribution of -1 percentage point.

Behind the industry's suffering lies the weakness of external markets. The domestic sector would have the capacity to grow, but demand for Hungary's exports is unfavourable, not only because of the generally weak economic activity, but also because of its structure, which is unfavourable to Hungary.

Cover photo (for illustration purposes only): Getty Images