The external trade surplus reached EUR303.6m in October, down by 42.2% y/y, the statistical office (KSH) published detailed trade figures. The surplus number has been revised slightly up compared to the preliminary estimates due to higher upward revision in exports. The foreign trade surplus reached EUR5,164.4m in Jan-Oct narrowing by 24.3% y/y, which we think was partly due to worsening terms of trade and partly to the strength of domestic demand. Structural problems in the local car industry have also constrained the export performance since the start of the year despite the positive impact of spell of forint weakness, in our view.
The foreign trade surplus has been contracting for the third month running already but we note that the pace of worsening diminished markedly compared to Aug-Sep even if remaining in the double-digit area. This was solely the effect from exports rebound while imports continued gaining speed. Exports switched to growth of 6.7% y/y in nominal terms in October, recovering from the one-off decline in the month before. In real terms, exports also turned to expansion, rising by 6.4% y/y but it appears that part of the improvement was on account of calendar effects since the adjusted growth figure is lower at 3.9%. Looking at trade partners, the nominal exports improvement was due to higher sales to the EU while the exports to non-EU partners barely changed y/y in October but this is still better than the decline in the previous month. Almost all sub-groups contributed to the y/y rose in exports during the month but crude materials, which continued to decline in October. The largest boost came from machinery and transport equipment, which posted deteriorations in the previous two months. However, this was due to rise in exports of telecommunications and sound recording equipment as well as electrical machinery while the sales of transport vehicles abroad hardly changed, the KSH explains. In our opinion, the figures continue to show that the car industry remained constrained, reportedly due to the new EU emission measurement standards.
Exports have been losing strength this year and we think that this weakness might persist in the short term, given also signals for slowdown of the eurozone economy. The downward trend in the external trade surplus is therefore likely to continue despite that terms of trade might start to improve on the back of the recent decline in global oil prices. Terms of trade continued contributed negatively to the external trade balance in October, worsening by 2.0% y/y, the KSH said.
Real import growth accelerated to 7.4% y/y in October, among the strongest increases this year. In calendar-adjusted terms, however, real import growth weakened, posting the lowest growth since May. Import growth was boosted by purchases of machinery, manufactured goods and foods, in our opinion stimulated by the buoyant domestic demand. The only category to post a decline was fuels and electricity.