Industrial output fell 5.3% year on year (chart) in August and by 6.1% y/y when adjusted to working days, the Central Statistics Office (KSH) confirmed on October 13 in a detailed reading. The disappointing data came after a positive surprise in output in July.

The monthly 2.4% decline from July was the steepest among EU countries, according to data from Eurostat.

The breakdown by sector showed that the vehicle sector, which accounted for 23% of manufacturing output, dented the decline with a 4.6% annualised growth during the period, a slowdown from the 14.4% in July. This may be due to the effects of summer shutdowns, according to analysts.

The output of the computer, electronics and optical equipment segment, accounting for 10% of the total, fell by 11.2% and production of food, drinks and tobacco, with a 14% weight, contracted by 10.1%.

In line with previous months’ trends, the detailed figures expose the dual structure of the Hungarian economy, the dichotomy between multinational giants and less productive mid-sized locally-owned companies. Export sales slipped 8.1% and domestic sales dropped 17.6%.

The energy crisis has had little impact on export-oriented sectors, which continue to be the main engines of the manufacturing sector. Downside risks in the near future include the sluggish performance of Hungary’s export markets, namely Germany, which accounts for 25% of all exports.

Sectors producing mainly for the domestic market continue to underperform due to the collapse of demand amid a high inflation environment and are being squeezed by high operational costs due to high energy prices. The data suggests that this holds true despite the moderation of energy prices.

In absolute terms, industrial sales reached HUF5.2 trillion (€13.4bn) in August, of which export accounted for 60%.

In the first eight months, output dropped 4.6% y/y. The volume of new orders was 3.9% lower than in August 2022. New domestic orders decreased by 7.6%, and new export orders shrank by 3.3%. The order backlog at the end of August was 3.5% higher than the same period one year earlier.

Analysts forecast the decline of the sector to between 4-5% in 2023 after 6.1% growth.