Output of the automotive industry, Hungary's biggest manufacturing sector with a 26% weight, fell 3.9% year-on-year in October, detailed data from the Central Statistics Office (KSH) on December 13 shows.

Output of the electrical equipment segment, which includes batteries, shrank 16.9%.

Two subsectors posted growth. Output of the computer, electronics and optical equipment segment rose 16.3% and that of the food, drinks and tobacco segment, which made up 13% of manufacturing sector output, climbed 2.7%.

The KSH confirmed that headline data in October fell 0.2% (chart) and by 3.1% when adjusted to working days. On positive note, the data showed a 0.2% monthly growth, however, analysts cautioned that it is premature to call the monthly bounce as a trend reversal.

The volume of export sales, representing 62% of all sales dropped by 3.9%; domestic sales, accounting for 38% of all sales, declined by 2.8%.

Since the end of 2022, industrial output has been on a downward path and output remains below the average monthly performance of 2021. The energy crisis and the runaway inflation have unmasked competitiveness issues for domestic producers, mostly SMEs.

Large multinational companies, accounting for the bulk of production, were set back by the slump in the Eurozone.

 

 

The European automotive sector's crisis has significantly affected Hungary's vehicle and battery manufacturing industries. The recent wave of factory closures and layoffs in the automotive and supplier sectors offers little optimism for the near term.

In an ambitious bid to position the country as a strategic production hub connecting East and West, the Hungarian government has allocated hundreds of billions of forints in subsidies to Asian electric vehicle (EV) battery manufacturers. These subsidies aim to bolster Hungary’s status as a leading supplier in Europe’s energy transition. However, the structural challenges in the European automotive supply chain raised questions about the long-term sustainability of such investments.

Despite the increase in new orders (+8.1% y/y) in October, the total stock of orders at the end of October was below the previous year’s level by 20%.

Industrial output in the first 10 months contracted 3.9% year over year, and the sector is expected to be a drag on GDP growth for the second straight year. The government hopes that the utilisation of new capacities will pave the way for a rebound.