Hungary Industrial Output Declines In June

Hungarian industrial production fell in June for the first time since 2004 as gains by the forint made exporters less competitive. Production fell 0.3 percent from a year earlier, compared with a 4.7 percent increase in May, the Budapest-based statistics office said today. Output fell 1.6 percent in a month.



Looking at the chart the pattern is, unfortunately, all too clear. It seems to me we are looking at a quarter on quarter GDP contraction in Q3 2008. The high forint - which rose 2.1 against the euro in June and has gained 7.3 percent so far this year - is now starting to take its toll, since it is hurting exporters that sell mainly to the European Union, which buys the majority of Hungary's products. The slowdown in the UK and the eurozone is also, either directly or indirectly, starting to have an impact.

Hungary's economy expanded an annual 1.7 percent in the first three months, accelerating for the first time in five quarters, driven by exports while government measures to narrow a budget gap curbed domestic consumption. Growth was 1.3 percent last year, the slowest since 1993.