Hungary’s industrial output falls in June; Moody’s unlikely to change credit rating

Hungary’s June manufacturing data came in a tad weaker than anticipated. The nation’s industrial output declined 0.72 percent month-on-month following a surge of 5.4 percent in May. On an annual basis, output grew 4.2 percent year-on-year, as compared with consensus projection of 5.5 percent. In the recent data, there was considerable statistical noise.

In all, Hungary’s manufacturing sector is not expanding any more. It is estimated to be growing at an underlying 2 percent per annum rate that is in line with the 2016 GDP projection of 2.2 percent, said Commerzbank in a research report.

This pace of manufacturing performance would be in line with the projection of persistent low inflation and additional rate cuts by the Hungarian central bank in 2017. EUR/HUF is expected to trade at 320 by the end of 2016, added Commerzbank.

Meanwhile, Moody’s is unlikely to take any rating action on Hungary on Friday. There has been an increasing possibility of Moody’s following Fitch and upgrading Hungary to investment grade during the review; however, this seems unlikely under the Brexit uncertainties scenario that is making central bank policymakers revise down forecasts, according to Commerzbank.

However, Moody’s is expected to upgrade Hungary during its November review, assuming that the situation in the European Union in not entirely disorderly by then, stated Commerzbank.