Q1 GDP +4.7% yoy: past the peak, but descended just a little bit so far

HUNGARY - In Brief 15 May 2018 by Istvan Racz

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GDP expanded by 4.7% yoy on sda basis in Q1 2018 (the unadjusted number was +4.4%), slightly down from 4.9% yoy in Q4. This will make largely everyone happy, as:- analysts expected +4.2% on average, according to Portfolio.hu, though within a very wide, 3.8-5% range;- the government expects 4.3% growth for the whole of 2018, according to the recently published new Convergence Report; and- we expect 3.5% growth for 2018 as a whole, marking a moderate slowdown from the 4.2% recorded in full-year 2017.All this means that it would be quite difficult to prove on the basis of the preliminary Q1 number that one or the other forecaster was wrong. For sure, Q1 is the most difficult quarter of the year from the point of view of predictability, due weather impacts, statistical reporting features, etc. For us, the most important facts are that:- the industrial cycle is weakening now, following a similar trend in the Euro Area, just as we wrote in our previous in-brief a few days ago;- construction output is still expanding rapidly (+22.4% yoy in Q1), but growth is already slowing down compared to Q1 2017 (+26.1% yoy), simply because positive base effects are falling out of the formula, and as the recent stellar growth rates were just not sustainable;- consumer demand growth still accelerated in Q1 (retail sales were up 7.2% yoy on day-adjusted basis); and finally- further deceleration in the overall economy should follow in the rest of 2018, as wage growth will necessarily subside from double-digit rates, and as a considerable amount of fiscal consolidation will be required after the pre-election spending spree seen early in the year.But for now, the Finance Ministry (replacing the...