Macroeconomic Outlook – July 2022 issue
On the basis of raw data, domestic GDP grew by 8.2% in the first quarter of this year compared to the same period in 2021. Contributing to this is the good performance of services in the first quarter, followed by the industrial sector, at around 1.2%. In terms of expenditure, the obvious contributor was the final consumption of households, which reached 6.9%. The current geopolitical environment undoubtedly weighs on growth and remains a significant adjustment variable for future activity, with EU sanctions and rising energy and raw material prices being risk factors. The Covid epidemic also seems to be slowly picking up in several countries, a phenomenon that needs to be monitored.
Source: EXIM Hungary, Factset, HCSO, Eurostat
Domestic sales in retail trade (April 2015 = 100)
Source: EXIM Hungary, Factset, HCSO
Domestic industry grew by 9.4% in May 2022 compared to the same month of the previous year, the volume of industrial exports expanded by 11.6% in the same period and domestic industrial sales increased by 9.5%. While pharmaceuticals and chemical manufacturing fell by 4.2% and 3.6% respectively, due to material supply disruptions, almost all key sub-sectors boosted industrial performance. Food production increased by 17.1% (accounting for 12% of the whole domestic manufacturing output) and in particular, electrical equipment production rose by 37% due to the batteries and accumulators. Another indicator that could predict very good numbers for the coming month is the total volume of new orders, which increased to 25.5% compared to May 2021. This brings the total stock orders up to 30% compared to the same month of the previous year.
Industrial production Hungary (seasonally adjusted, 2015 = 100)
Source: EXIM Hungary, Factset, HCSO, Eurostat
The second piece of good news relates to employment: the unemployment rate has reached 3.5% with around 169,000 people actively seeking employment, the lowest level since February 2020, but with a higher participation rate than before. This very good employment environment will mechanically stimulate consumption, which will continue to boost growth in the next six months. So far, this has been confirmed, with retail trade growing by 11.1% in May 2022 (+11.6% in the first 5 months of the year), driven mainly by textiles, computer equipment and automotive fuel. Fueled by both household activity and business developments, investment is and will hopefully remain one of the two strong drivers of economic expansion in the coming period. The construction sector contributed to the high performance of investments with a 9.9% increase, outperforming May 2021, thanks to the very good indicators in the residential sector. Investment in machinery and equipment was boosted by foreign trade.
Source: EXIM Hungary, Factset, HCSO
Volume indexes of investments in national economy (seasonally adjusted, average of quarters YoY, 2015 = 100)
Source: EXIM Hungary, Factset, HCSO
Volume index of construction output (seasonally adjusted, 2015 =100)
Source: EXIM Hungary, Factset, HCSO, OECD
The value of exports increased by 28% annually compared to the previous May. The external trade balance in goods showed a € 135 million surplus for the first time since the beginning of this year. The external trade in services also performed well in the first quarter because it amounted to € 1,418 million surplus, an increase of € 552 million compared to the same quarter of the previous year. Exports of services increased by 28% YoY mainly driven by travel, transport services and manufacturing services on physical inputs. Net exports are projected to contribute positively to the GDP growth next year.
Hungarian external trade in services (in M€)
Source: EXIM Hungary, Factset, HCSO
