Good industry data, CPI tomorrow, reports going on holiday

HUNGARY - In Brief 07 Sep 2023 by Istvan Racz

---

The July industrial output data, reported this morning, actually looks quite good. Output grew 2.8% from June, a nice upturn after a nearly one year long downtrend (chart in volume terms, December 2010 = 100, courtesy of KSH): In yoy terms, output was still down by 2.7% yoy, after -5.3% yoy in Q2 and -4.1% in Q1. It would be really great after all this setback if the July pick-up marked the start of a recovery. This remains to be seen, of course, but circumstances are not entirely positive in this regard. We mean KSH's brief comment that it was still car manufacturing and battery production which were strong, whereas the rest was much weaker. For sure, we do not want to discriminate the car industry, but it is predominantly based on external demand, including vertical integration in international production chains, and recent signals suggest that the European picture remains a bit unpromising in that regard. We would be certainly more happy if some improvement of domestic demand could also be observed in the background, but we have not seen any such evidence lately. On a different subject, CPI-inflation for August is expected tomorrow. There is no doubt that the yoy headline rate is going to descend substantially further from July's 17.6%, as monthly inflation was a very high 1.8% in August 2022, but it is an open question by how much exactly. It is tricky, because of the unpredictability of food prices, given the lack of transparency created by the lifting of administrative price controls from August 1 and the (somewhat misleading) official hype about the government's new online price-watching instrument. As a reminder, the MNB's late-June inflation report expected 15...