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Tuesday, August 19, 2008

Hungary Construction Activity Falls Back Sharply In June

This is really a bit of a shocker I think, since following signs of some sort of small recovery in April, output inHungary's construction industry fell by a seasonally and working day adjusted 9% year on year in June, contracting even more rapidly than in May (6.7% fall year on year), according to the latest data from the Central Statistics Office (KSH) earlier today.

Even more disturbingly there was a 5.4% month-on-month decline in output from May, against only a 0.8% contraction in May from April. If we look at the chart for the construction index (below) we will see that output is now not far above the very low levels in September and November 2007.

And the outlook in the immediate future doesn't seem to be any more promising, since the stock of orders was down 35.2% at the end of June over June 2007 (vs. -35.8% in May). The corresponding figure for new building orders was -35.1% and -35.2% for civil engineering. The stock of new orders in January-June was down 13.8% across the whole sector.

Now one reason for this slowdown can be that new mortgage lending seems to have virtually ground to a halt in Hungary since last March, and indeed the total outstanding mortgage debts seems to be reducing (see chart below).

The same even seems to apply (or perhaps especially seems to apply, as the credit crunch gradually locks-in) to those beloved Swiss Franc mortgages (see chart below).

So really, the outlook for domestic demand in the coming quarters looks pretty downside oriented to me.

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