Apart from month-on-month growth, the more favorable January 2010 report is also due to a relatively low statistical base in January 2009 (which was lower than any of the monthly outputs since January 2005).

Thanks to growing demand in export markets, industrial exports increased by 13.4% compared with January 2009. Two leading segments of the processing industry accounted for 60% of export sales.

One of these is the electronics and optics industry, the leading export segment within the processing industry, which witnessed 23.9% yr/yr export growth and accounted for nearly one-third of processing industry exports in January 2010. The auto industry increased export sales by 18% compared with the corresponding month of the previous year, as a result it contributed more than 25% of total processing industry exports.

At the same time, consumption in Hungary did not show any signs of recovery: the industrial sector reported 12.6% decline in domestic sales year-on-year. Within the entire sector, processing industry sales fell 11.2% on January 2009, mostly due to shrunken demand from households and business investment.

Considering the zigzag line of sector performance in recent months, at this point it is difficult to foresee whether the upturn will be a fleeting or permanent trend. The January stock of orders warrants nothing more than cautious optimism; total new orders in the selected processing industry sectors fell 6.4% yr/yr in January 2010. While the annual trend is still rising, the overall level of orders has remained 10% below the early 2005 data.

New export orders have dropped by a smaller dregree of 2.9%. When evaluating this information, optimism may be supported by an argument that the downturn is essentially due to statistical base effects.

The report reveals a major slump in new domestic orders, which fell 26.7%. Total orders were 16.4% below the January 2009 level."

Source: Portfolio Online Financial Journal