The future outlook for the Hungarian industrial sector appears grim, as the recent improvement in output is likely just a fleeting anomaly.
In July, Hungary’s industrial production experienced a significant decline of 6.4% compared to the same month in 2023, marking the lowest performance recorded this year according to seasonally adjusted data released last Friday.
Interestingly, the adjusted indicator remained unchanged from June to July, suggesting stagnation following the previously reported year-on-year decrease of 3.7% coupled with a modest monthly increase of 0.5%.
“After the unexpected positive turn in June, the Hungarian industrial sector struggled to maintain its momentum in July,” stated Péter Virovácz, senior economist for Hungary at ING. “We had concerns that the June uptick might be a one-off event, and it appears that was indeed the case. The lone silver lining is that we have not encountered a substantial downward correction.”
The year-over-year decline is largely attributed to decreases in the manufacturing sectors of transportation equipment, electrical devices, and computer technology. However, there was some good news with an increase in the production of food, beverages, and tobacco products during this period.
“Hungary’s industrial production has been on a downward trajectory since 2022… so in this light, the data for July aligns with expectations,” commented Barna Szabó, chief economist at the Equilibrium Institute. “The decrease can be partly attributed to the lackluster performance of the European economy, particularly the German industrial sector. Additionally, Hungary’s primary focus on vehicle and battery production—key components of its industrial strategy—has been hampered by global demand weaknesses and a slower-than-anticipated shift towards electric vehicles.”
Ádám Czelleng, an associate professor of economics and founder of Rekon Partners, echoed similar sentiments, stating, “The Ministry of Economy has linked this production decline to the ongoing conflict in Ukraine and the sanctions enacted by the European Union. It also highlights the slower economic performance in Germany, which significantly impacts Hungary, given the prominence of German investments within its economy.”
While the Hungarian government attributes the stagnation in industrial output to weak export conditions, it is important to note that sluggish domestic consumption also plays a critical role in this downward trend.
Photo credit & article inspired by: Euronews
