In Hungary industrial output growth strengthens to 9.2% y/y in May on calendar effects

Industrial output growth picked up to 9.2% y/y in May, compared to the 5.3% y/y growth in the previous month, the statistical office (KSH) reported. Output growth recovered further from the weak performance in Q1 but the recovery was entirely on account of calendar effects. Calendar-adjusted industrial output growth slowed down during the month but nevertheless showed considerable improvement in the past couple of months over the Q1 dynamics. We consider the data in line with our expectations for a recovery of industrial activity but staying on a slightly weaker path than the 2015 average on account of expiring low base effects. On a seasonally- and calendar-adjusted basis, industrial output contracted by 0.7% m/m in May but the sector has still recovered noticeably from the temporary dip in Q1.

The temporary weakening has been attributed mainly to a weak automotive industry, which the National Bank of Hungary (NBH) attributed to restructuring of production due to pending introduction of new models. We think that the local car industry should nevertheless remain healthy, judging by announced plans by most of the major car plants in the country to expand production further this year. The car plants of Suzuki, Mercedes as well as the car engine plant of Opel planned large output volume growth for this year. The Audi Hungaria car plant, which was arguably behind the Q1 slowdown, has not announced specific output targets for 2016 after the record-breaking production last year.

The KSH is due to announce detailed industrial output figures for May on Jul 13.

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