Order restored: Manufacturing PMI is now in line with the Eurozone and the CEE/Turkey

HUNGARY - In Brief 04 May 2020 by Istvan Racz
The extreme historic low of 29.1 reported for the manufacturing PMI for March was way out of line with any of the Euro Area, Poland, Czechia and the Turkey at that time. The Euro Area PMI was still at 44.5 and the other countries reported similar values (Poland 42.4, Czechia 41.3, Turkey 48.1). This was not quite logical, given the deep vertical integration between the Euro Area and the CEE region especially in manufacturing, and the similarities between the manufacturing sectors of CEE economies (product structure, technology, direct investors, markets, wage costs, etc.). Whenever operations were forced by the Covid-19 disease to close down in this broad region, it had to happen pretty much everywhere at largely the same time.However, order has been apparently restored now that the April data came out. Hungary's monthly PMI number rose to 33.6, whereas the Eurozone and Turkey dropped to 33.4, Czechia to 35.1 and Poland to 31.9. All members of this tightly linked-together company are now in the same camp again. It still remains unclear why exactly Hungary's number reacted one month earlier than the others. But at least it can be legitimately claimed that this time around the Hungarian PMI behaved the most like a genuine leading indicator, giving an early signal of what was going to come.The actual industrial output data for March is scheduled for later this Thursday (May 7). Hopefully the KSH will not get a 'virus infection', similar to the one that apparently caught the National Employment Service in March, leading to the unavailability of the institution's usually excellent report on the monthly state of the labor market, at least for the time being.

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