Fixed investment up 34% yoy (!) in Q1

HUNGARY - In Brief 30 May 2017 by Istvan Racz

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This morning's fixed investment data gave good explanation on what exactly drove up Q1 GDP growth to 4.1% yoy unadjusted / 3.7% yoy, sda. It was (now) evidently fixed investment growth, which in itself explained 3-3.5% yoy growth in Q1 (unadjusted) GDP, leaving really little for anything else on the demand side, including mainly consumption by the household sector.The easy way to explain why fixed investment was so strong would be to refer to a massive recovery by payouts under EU-sponsored development projects, which were up by 57% yoy in Q1, and the actual pick-up in terms of the total funds available under those programs was certainly even bigger, given the lucrative advances paid by the central government on many projects in Q4 (please, see our previous reports on that issue).But in fact those EU-backed payouts are only part of the story, as they represent only about a quarter of total fixed investment, so something else must have been very robust, too. And yes, FI rose by 32% yoy in manufacturing and trade, 46% in agriculture and by 56% yoy in property development. These are typically (though far not exclusively) commercially driven, private sector activities, which in total represent close to 60% of total fixed investment. So the most recent industrial recovery, based on the strength of manufacturing in Europe, the booming housing construction sector and the similarly buoyant other property development (e.g. of office buildings) also played a role.Together, all this signals a rather strong economy. However, one word of caution, as usual: Q1 is usually the weakest period for fixed investment, the quarterly volume of which represents only about 3% of total annual G...