Hungarian industry races downhill without stopping
Industrial performance at the beginning of the summer is disappointing, if only because May already saw a decline (-1.1%), and the sector has continued to shrink since then.
The trend is clearly downward, with no sign of a turnaround in an industry that has been in recession since 2023.
The Hungarian industry continues to suffer from the generally weak economic performance of the country's external markets, but the Hungarian economy is particularly hard hit by the structural challenges facing the automotive manufacturing sector. As a result, most sectors of the domestic industry are experiencing a downturn, and the launch of large production capacities (CATL, BYD, BMW) planned for this year will be delayed until at least the beginning of next year.
For this reason, it seems quite likely that 2025 will be the third consecutive year of declining industrial production, which has not been seen since the 1989 change of regime.
The detailed reasons for the weak performance in June will be revealed in a more in-depth report next week. For now, the KSH has only announced that production volumes declined in most manufacturing sub-sectors compared to the same month last year. Among the most important sub-sectors, there was a slight increase in the production of food, beverages and tobacco products, computers, electronic and optical products, and electrical equipment, while vehicle production fell significantly.
This information suggests that the traditional longer summer shutdowns may also have played a role in the industry's decline in June. However, it is not certain that this will lead to a rebound in the coming months, as the classic period for such temporary production breaks is July-August, while the latest data is for June.
According to our calculations, industry did not contribute to GDP growth in the second quarter, either on a quarterly or annual basis. At the same time, it is a relative improvement that, due to a slightly stronger April, the situation was close to stagnation on a quarterly basis, which represents a better contribution than what we saw in the first quarter. Paradoxically, this weak performance may have contributed to the fact that the economic downturn in the first quarter was followed by a slight upturn in the second quarter.
The big question for the second half of the year will be how European industry responds to the trade agreement. As is well known, the general tariff has risen to 15%, but the burden on the automotive industry has fallen from 25% to 15%.
Cover photo (for illustration purposes only): Getty Images
