Output in the first five months was up 7.3% yr/yr.

The May data signal clearly positive trends. In contrast with last year’s several false starts and corrections, distinct signs of an upsurge have been visible in the industrial sector over the past few months. As manifested by the chart below, the sector has climbed about halfway back from the abysmal depths experienced during the worst phases of the crisis.

The upturn in Hungary’s industrial output over the past few months has been clearly due to improved export performance. Export figures have been strong month after month as global recovery defied concerns and did slow down to a degree that would have impacted export demand for Hungarian products. On the other hand, the fact that Hungary’s processing industry purchasing manager index has fell back to the negative range remains a cause for concern, projecting a decline in overall industrial performance. As yet this is not apparent in the industrial production figures; the forecasting power of the PMI tool remains to be seen over the next few months.

Industrial exports increased by 18.8% compared with May 2009, slightly less than in the preceding month (19.3%) and were up 15.1% in January-May. Two leading segments of the processing industry accounted for more than half of export sales. One of these is the electronics and optics industry, the leading export segment within the processing industry, which witnessed 25% yr/yr export growth and accounted for nearly one-third of processing industry exports in May. The auto industry increased export sales by 18.4% compared with the corresponding month of the previous year, as a result it contributed more than 25% of total processing industry exports.

Domestic industrial sales picked up 4.1% yr/yr, swinging to the positive side for the first time since September 2008 (+2.8%). In the first five months, the KSH detected a 5.6% decline here. Within the entire sector, processing industry sales rose 3.1% yr/yr but were down 5.4% in Jan-May.

The stock of orders dropped 11.2% yr/yr in May, an improvement over a 15.9% decrease in April. Compared to 2005, though there is still a 20% backlog. The stock of domestic orders declined by 29.1%, less dramatically than in April (-43.8%).

Total new orders leaped by 40.6% yr/yr in the fifth month of the year, up markedly from a growth of 26.1% in Apr. New export orders shot up 43.7%, versus +29.6% in April, but before our jaw would drop we need to note that this impressive growth compares to a period when the Hungarian economy hit rock bottom. New domestic orders were up by 22.8%, picking up from 6.8% in April."

Source: Portfolio Online Financial Journal