Genuine bad news on industry and merchandise trade in November

HUNGARY - In Brief 10 Jan 2023 by Istvan Racz

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Industrial output fell by 0.7% mom, on sda basis, in November, following a 3.6% mom decrease in the previous month. This pulled the yoy expansion down to 0.7% in November, from 4.8% in October and 8.3% in Q3.  November numbers are preliminary, meaning a revision in the final data is unlikely but the details are not yet available. But anyway, two conclusions can be drawn from these results. First, manufacturing PMI data - 56.4 in October, 56.0 in November and 63.1 (!) in December appear somewhat misleading. It is quite interesting: Hungary has two publicly propagated leading indicators for growth - the WEAI for GDP and the manufacturing PMI for industrial output - and both appear to have broken down lately. Second, it is to be noted that robust industrial growth, markedly above the EU average, had been the pride and hope for official speakers until most lately. Moreover, the recently amended 2023 budget has been built on the foundations of 1.5% positive real GDP growth, saying that domestic demand, both consumption and fixed investment, will likely fall, but net exports, due to robust industrial output, will likely bring GDP growth back to the positive territory. But this expectation increasingly seems to be somewhat unrealistic. This is unlikely to badly hurt the budget, as an unrealistically low 15% average CPI-inflation is also part of the macro assumptions. But from the point of view of growth, the kind of soft lending that the government is going for will probably not happen. The good news about this is that a recession, hopefully not a particularly deep one, would be beneficial for disinflation prospects. The other piece of fresh macro news is pretty much the othe...