Q3 GDP was stronger than expected

HUNGARY - In Brief 14 Nov 2018 by Istvan Racz
GDP growth in Q3 was reported by the KSH at an unadjusted 4.8% yoy, just slightly down from 4.9% yoy in Q2, and substantially stronger than the 4.3% yoy analyst expectation (which we were in agreement with). This means 4.7% yoy cumulative growth for the first three quarters. On seasonally and day-adjusted basis, Q3 GDP growth looked even better with an acceleration to 5% yoy from the 4.7% yoy reported for Q2. This was in fact the third best result within the EU after Poland and Latvia, although CEE member states all did quite well in Q3.This report was the first estimate of GDP data, released without sectoral details. However, KSH provided a very short communiqué, which explained why analysts were so much wrong on this data release. The statement said that the contribution of market-based (typically non-government) services to the good result was especially high, and this is an area on which very little preliminary information is available.Following the data report, finance minister Varga said he now expects 4.3-4.5% GDP growth for full-year 2018, which may have been even a somewhat conservative statement. More interestingly, the negative side of the story is that faster than expected growth will likely aggravate the existing inflation problem.

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