Industrial output and prospects seem improving

HUNGARY - In Brief 10 Jan 2022 by Istvan Racz

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The performance of the industrial sector has been a genuine weak point lately, because of the global supply problem related to semiconductors, hitting car manufacturing and to a lesser extent the electronics industry.Against this backdrop, the latest output and PMI data reflects material improvement. For one, total industrial output expanded by 2.9% mom, 2% yoy in November. the best data seen since July. Actually, output fell moderately on yoy basis in both of the previous two months, on a sharp setback of car production. Details on the November data is not available yet, but it is quite for sure that the car industry must have had a role again.The other interesting number was the manufacturing PMI for December. This showed a sharp uptick from November, from 52.2 to no less than 64.8. Here, a bit of caution is advisable, because these are seasonally adjusted figures, which normally means a significant upward correction in any December. So we would not give too much weight to the exact figure. What seems to be reliable information, however, is that the December number indicates the improvement of prospects. An accompanying comment in this month's report was that the PMI went up mainly on growing orders.To what extent this was due to growing domestic demand is unclear. But we know that retail sales grew by 2.9% yoy in November, by slightly less than in the previous two months. Generally, consumer demand growth is contained by rising inflation, which is gradually eating away the real content of nominal wages. The latter effect is temporary, as in Q1, new annual wage arrangements will step in, and the government is going to start to deliver on its generous campaign promise...