World Economy

Hungary Factory Production Down

Hungary Factory Production DownHungary Factory Production Down

The volume of industrial production in Hungary decreased by 0.1% month on month in January, according to figures adjusted seasonally and for working days, the Central Statistical Office, or KSH, reported on Monday.

This is the third consecutive month when the stats office recorded contraction on a m/m basis, i.e. both the end of 2015 and the start of 2016 turned out rather poorly for the industry. “We should not be overly concerned, though, but we continue to expect slowdown in the sector this year,” Portfolio quoted the report as saying.

In monthly terms, Hungary’s IP decreased 1.4% in November 2015, 0.7% in December and 0.1% in January this year, which is not a promising streak at all. Especially as the first month of the year generally brings robust IP growth as production lines rev up again after the end-year manufacturing recesses (especially in the automotive sector).

“As regards the poor performance, the million dollar question is whether we should consider this a lasting trend. We are inclined to think that this is merely a temporary faltering that may be followed by a major correction in February. We base this assumption on the fact that industrial orders are still sufficiently high and also because short-term economic cycle indicators suggest a favorable climate. We will know more about the poor January performance on Friday when the stats office releases detailed IP figures for the first month of the year,” KSH report said.

“Although we do not expect contraction of the sector despite the lackluster performance of the last few months, we do forecast some slowdown. We do not believe last year’s 7.5% annual average IP growth is attainable this year.”

It added that this projection is not based on data from the last three months but on the expectation that the extremely dynamic growth in vehicle manufacturing could abate as capacities rise close to their maximum.

As a result, the contribution of the sector, which has been the major driving force in industrial production growth, could become smaller this year.