Foreign trade surplus shrinks by 18.1% y/y to EUR458m in Hungary

The foreign trade surplus amounted to EUR458m in August and fell by 18.1% y/y, the statistical office (KSH) reported. The narrowing surplus continued the trend since the beginning of the year after worsening terms of trade and recovering domestic demand started to negatively affect the external trade position. Summer holiday outages of large plants in the automotive industry also contributed to the declining trade surplus by reducing exports. On a cumulative basis, the surplus reached EUR5,592.2m and fell by 16.2% y/y in Jan-Aug.

Export growth picked up noticeably to 10.2% y/y in August and confirmed the earlier industrial data that the impact of the summer holiday plant shutdowns has been overcome. In real terms, export growth also accelerated to 7.3% y/y during the month, which was somewhat stronger than the average performance since the beginning of the year. Expectedly, exports were supported by continued favorable demand from the EU on the back of the positive economic development in Hungary’s main trading partners from the region. Exports to the EU rose by 7.7% y/y in August while exports to non-EU countries also accelerated but to a slower 5.4% y/y growth. In particular, the recovery of export performance was boosted by the car industry – exports of transport equipment and machinery rose by 6.7% y/y after y/y declines in the previous two months. Fuels and energy as well as crude material export growth accelerated noticeably as well.

Real import growth picked up as well to 9.5% y/y in August. We associate the import growth rather with the resumption of car industry activity after the summer holidays and a related increase in input demand. Imports were also boosted by a 12.0% y/y increase in fuel and energy imports, following a contraction in the previous month. The strong increase in energy imports reflected imports of petroleum products and natural gas, the KSH said. It should be noted that energy imports have been strongly volatile so we do not consider their increase as a permanent factor to boost total import growth. We think that the import data still suggested a stable and sustained increase in domestic demand.

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