Industrial output in Hungary fell 4.2% year on year (chart) in November and by 2.9% when adjusted to working days, according to preliminary data from the Central Statistics Office (KSH) released on January 9.

After a bounce in October, the monthly data showed a 1.6% contraction, dashing hopes of a potential turnaround, financial website Portfolio.hu noted, adding that given the persistent weakness of European economies, namely Germany, the latest figures come as little surprise.

This is particularly true for the automotive industry, the driving engine of the economy that accounts for a 25% weight within industrial output, but the production volume of battery manufacturing also sank below last year’s level.

The sector has been on a declining trend since late 2022, hit hard by consecutive streaks of crises, from the peak in the energy crisis to the war and the slump in Germany.  

The KSH will release a detailed breakdown of sectors in the second reading a week from now. In the first reading, it said most of the manufacturing branches registered declines, including the two biggest, the automotive and electronics sectors, and output rose in just three subsectors, including crude processing.

The latest figures dampen hopes that the economy escaped from recession in the last quarter, analysts said, adding that industrial production is slated to decline for the second straight year, which had not happened since the end of communism.

Output in the January-November period shrank 3.9% y/y. The National Economy Ministry blamed external factors for the poor reading, adding that the Hungarian economy is unable to shield itself from the adverse impacts of Germany's political and economic instability, especially those affecting the automotive sector. The sector has been on a declining trend since late 2022.

The ministry said that big investments in the pipeline by CATL, BYD, BMW, SEMCORP and EcoPro could give a boost to Hungary's industrial sector. The MNB in a recent forecast projected that these projects could add 0.6pp to GDP in 2025 and 0.8pp a year later as production is ramped up.