Hungary’s industrial production expanded 0.2% y/y in January (chart), easing the growth rate from 2% y/y recorded the preceding month, the Central Statistics Office (KSH) said in a preliminary reading on March 7.

The reading is a surprise, analysts say. “The last time the Hungarian industry performed this poorly was during the darkest days of the COVID-19 crisis. Back then, it was easy to understand the poor data, but the same cannot be said this time,” ING said in a comment.

“We think that some energy-intensive sectors are still facing cost-side pressures as they could be stuck with bad energy contracts which are not following market prices,” ING also said.

Plant shutdowns due to lengthened winter stoppages to save energy and temporary factory outages for maintenance also contributed to the industrial sector’s poor performance in January, according to analysts. 

Output also dropped 3.2% y/y following adjustment for calendar effects. In m/m terms, industrial production slid 5.1% after seasonal and working-day adjustments.

The manufacture of electrical equipment grew at the highest rate, with the manufacture of transport equipment, computer, and electronic and optical products following. 

The volume of production fell most significantly in the food, beverages, and tobacco segment, KSH data showed.

“With the Hungarian industry starting 2023 so bleakly, we believe that a GDP contraction in the first quarter cannot be avoided,” ING said.

Hungary's GDP growth came in at 0.4% y/y in the fourth quarter, a considerable slowdown from an expansion of 4% the preceding quarter, KSH said on March 2. Adjusted for seasonal and calendar year effects, growth was 0.8 y/y. 

On a quarterly basis, GDP edged down 0.4%, falling for a second consecutive quarter, thus confirming the technical recession in Hungary since the start of Q3.