Industrial output fell further markedly in April

HUNGARY - In Brief 07 Jun 2023 by Istvan Racz

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Industrial output shrank by 2.5% mom, 5.6% yoy in April, on seasonally and day-adjusted basis, following a 3.8% yoy decrease in Q1. This marks a downtrend that has been there since an all-time peak of output in September 2022. The level of output was 8.6% lower in April than at the September peak. Note: Year-on-year changes in percent, output in volume terms Details are not known yet, but based on the experience of previous months, the primary reason for the latest downtrend appears to be the weakness of domestic demand (domestic sales: -15.1% in Q1), whereas exports are holding up reasonably well (the latter still meaning -0.5% yoy for Q1, in terms of the volume of industrial sales for exports, far not as positive as one could think on the basis of the 7% yoy increase of total exports of goods, as reported by the national accounts figures published for the same period). Curiously, sales were significantly weaker than production in Q1, as regards yoy growth indices, which is not necessarily a good sign regarding near-term growth prospects. Anyway, we hope that the chart above, exhibiting falling output, the increasingly strong forint and the sharply decelerating producer price inflation in industry, shows clearly that the current environment is much more counter-inflationary than pro-growth in nature. An important note though is that causality is mixed, so we are not suggesting that industrial output is weak only or primarily because the forint is getting stronger. For example, the forint is getting stronger in part because domestic (and import) demand is weak and the current account is strengthening on that factor, and domestic industrial sales are weak for the same r...