Recession continued in Q2 as well, analysts expected markedly better numbers

HUNGARY - In Brief 16 Aug 2023 by Istvan Racz

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Preliminary Q2 GDP growth was reported at -0.3% qoq, -2.3% yoy on seasonally and day-adjusted basis. Analysts appear to be unhappy, as the median expectation was +0.3% yoy, -1.3% yoy. There was a downward revision of the Q1 data as well, to -0.4% qoq, -1.2% yoy, from the original actuals of -0.2% qoq, -1.1% yoy. At this point, no breakdown is available, but the KSH said in a brief communiqué that agriculture and health care services were still significantly positive contributors, whereas industry, trade, transportation and storage contributed negatively (the latter obviously having to do with the poor showing of retails sales). In fact, the relatively optimistic expectation that recession - now on for the last four quarters - may be over in Q2 already, was based to a great extent on the super performance of agriculture in Q1, which was to some extent extrapolated into Q2 forecasts as well, not least on the basis of continued good weather (lots of rainfall) during that period. But it looks like KSH may have overestimated the agricultural upturn in Q1 (which we always suspected) and it may have been prompted to make a downward correction in the Q2 numbers (the overall H1 data still remaining very positive for the sector). Without something like this happening, the Q2 GDP data would have been much more in line with analyst expectations. For sure, this is only a working hypothesis on our part for the time being, although a reasonably likely one. Should we be proven wrong when the final data is out, we will be most happy to publicly revoke these assumptions.