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Friday, July 18, 2008

Hungarian Construction Continues Its Moderate Uptick in May 2008

The recovery in Hungary's construction industry appeared to falter in May, with the year on year level of output falling again - at a 7.8% rate - when compared with the 0.8% y-o-y growth recorded in April, according to the latest data from the Central Statistics Office (KSH). According working day adjusted data, the y-o-y decline was 6.7%, versus a fall of 1.6% in April.

However, on a seasonally and working day adjusted basis there was a 1% month-on-month decline in output in May, compared with a 3.1% increase in April. Output in January-May was thus down 12.1% compared to the first five months of 2007. However if we look at the chart below, we can see that while output fell back a little in May over April, it is still up on March, and in fact since January the trend has been upwards. On the other hand we are still well down from the much higher levels attained at the end of 2006.

The stock of orders in construction industry enterprises was 36% below the level of May 2007. The figure at buildings was -32.1% and -39.2% at civil engineering.

So we can say that the Hungarian construction industry showed some signs of revival in the February-April period, despite the fact that the improvement took place from very low levels. (At the end of 2007, the volume of construction industry output was at levels last seen in early 2003.)

The significance of this is that the construction industry contributed to the very weak recent headline GDP growth with very large declines in each of the last six quarters, and hence this small revival will undoubtedly help nudge GDP groth up in Q2. However we need to be extremely careful in moving beyond recognising this evident fact to drawing any more generalised conclusion about the course of the Hungarian construction industry in the coming months. Like so many other things about the Hungarian economy right now, it depends.

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