Decline in Hungary’s Feb industrial production suggests activity slowing cyclically

Hungary’s seasonally-adjusted industrial production dropped 0.8% m/m in February, as compared with consensus forecast of a growth of 3.5%. The expected growth was high as output had fallen in January too by 0.1% m/m due to assumed one-offs in the auto sector.

IP data for February, however, implies that the reading recorded in January might not have totally been a one-off, according to Commerzbank. It suggests that industrial output is slowing cyclically as was hinted in the country’s PMI that dropped to 50, added Commerzbank.

“After enjoying a strong couple of years on the back of strong euro zone demand for autos, Hungarian activity has calmed down, which supports our sub-consensus 2.2% GDP growth forecast for 2016”, noted Commerzbank.

This trend is also likely to underpin the central bank’s decision to resume the easing cycle, said Commerzbank.