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Industrial output up 4 percent in July

Hungarian industrial output rose by an annual unadjusted 4 percent in July, up from an increase of 1.5 percent in the previous month, the Central Statistical Office (KSH) said on Wednesday in a first reading of the data.

Data adjusted for the number of working days showed an annual increase of 6.6 percent in July.

Month on month, output was up 1.1 percent based on seasonally and working day-adjusted data.

The growth was driven by the leading sectors in Hungary, such as vehicle manufacturing and the manufacturing of computer, electronics and optical products. The output of food, beverage and tobacco products lagged behind.

In January-July, output grew by an annual 4.9 percent.

The Ministry of Technology and Industry (TIM), commenting on the data release on Facebook, said industrial output had exceeded the pre-pandemic level in January 2020 by 7.6 percent. The ministry said the expansion of Hungarian industrial output was record-breaking amid a gloomy international economic climate. With skyrocketing energy prices and supply chain disruptions, however, the outlook is hard to predict, it added.

The ministry noted the recently announced 3,000 billion forint investment by China’s CATL in Debrecen as well as other investments linked to electric cars and battery production, alongside new defence-related projects, were expected to enhance the industrial sector’s performnace.

Gergely Suppan of Magyar Bankholding told MTI that the data outperformed expectations and output had fully recovered from the pandemic-related economic crisis. Given the low base in the third quarter of last year and easing microchip supply stress, output may increase even further going forward, though the Russia-Ukraine war and fractured supplier chains were risk factors, while several sectors may curb production due to skyrocketing energy prices, he added.

Peter Virovácz of ING Bank said that after disappointing retail data, the July industrial output data provided a brighter picture of Hungary’s economy. Following April’s nadir, output has continued to tick upward as companies get better at handling supply chain problems. But how far rising energy costs will dampen production potential is an open question, he added.

Risk factors are the threat of new supply difficulties which could render the high order backlog worthless if the energy crisis forces producers to rationalize, while a drop in purchasing power could mean companies are no longer able to pass on the increase in input prices to customers, he said. Notwithstanding the positive July data, a slowdown may be seen in the next few months and Hungarian economic performance may decline quarter on quarter, Virovacz cautioned.

Gabor Regos of the Makronom Institute noted waning industrial output in Germany, Hungary’s most important foreign trade partner, and he warned that the July data should be treated with caution since the timing of summer shutdowns changed from year to year.

He said much uncertainty clouded the period ahead, and the growth rate could vary on monthly and annual bases. Investments and the low base linked to the dearth of microchips have helped to put a shine of the data, he said, while supply chain disruptions, the unfavorable global economic climate and runaway energy prices would weigh on the sector’s performance.

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