Hungary's industrial production fell 6.9% y/y in May (chart) for the fifth straight month, following an 8.3% decline in the previous month, the Central Statistics Office (KSH) said in a preliminary report on July 6. Output dropped 4.6% when adjusted for the number of workdays.

On a positive note, output rose a seasonally- and workday-adjusted 1.6% from April, but the slight rebound was not enough to break the negative trend, as output is still below the level recorded at the beginning of 2023.

In a short statement, KSH said that most branches of manufacturing contributed to the decline.

Among the biggest branches, electrical equipment and automotive production increased, while production of computers, electronics and optical equipment as well as of food, drinks and tobacco products declined, it added. For the period January-May, output dropped 4.8% y/y. KSH will release detailed data on the output of all industrial sector branches on July 13.

Domestic industrial orders were up by 6.2% y/y but overshadowed by the fall of new orders by 9.8% y/y.

The preliminary data suggests that Hungary’s export-oriented automotive industry has compensated to some extent for the very weak performance of companies producing for the domestic market, in line with the trends seen in previous months. Smaller companies have been hit harder by the energy crisis and cut back production.

The dichotomy between companies producing for the export market and those operating mainly in for the local market confirms the picture of steadily shrinking domestic demand in the economy, ING Bank said.

The bank expects industrial production to post negative growth in 2023 from modest growth in 2022 and agriculture could help Hungary avert a recession for the year.