Very strong GDP figure out for Q1 2014

HUNGARY - In Brief 15 May 2014 by Istvan Racz
Real GDP grew a preliminary 1.1% qoq / 3.2% yoy swda in Q1 2014, following a revised 0.7% qoq / 2.9% yoy swda in Q4 2013, as reported by the Central Statistical Office (KSH) this morning. This is a seven-year peak in the yoy number. As usual for preliminary GDP data releases, no details are available, but the KSH said that the strength of GDP came from the industrial sector and construction activity. The National Economy Ministry (NGM) said that in view of the new data, average real GDP growth for the whole of 2014 may turn out 0.3-0.6 percentage points higher than the government's latest 2.3% forecast. This data is a positive surprise for the market, as analysts' forecasts varied in a broad 2-3.5% range in various polls, the average being around 2.5-2.7%. In a sense, analysts were right, because they by and large correctly estimated the GDP-impact of the recent monthly releases of industrial, construction, foreign trade and retail sales data. We are saying this because 0.4 percentage points of the Q1 yoy growth figure stems simply from the upward revision for the previous three quarters (while the qoq growth data for Q1 2013, now outside the yoy formula, was cut by 0.3 percentage points). In other words, the economy was really strong in Q1, but not quite as strong as suggested by the new data. Regarding the NGM's optimistic statement on the full-year outlook, we are a bit less sanguine than that. The revision of data on previous quarters is sufficient to raise the average 2014 GDP growth rate by 0.2 percentage points in itself, but that still raises our full-year forecast to 1.8%. The point is that it seems extremely optimistic to prepare the GDP forecast by an extrap...

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