Hungary’s industrial output rose 8.7% year-on-year in August and 1% from the previous month, a stronger-than-expected performance that analysts said confirmed the sector’s improving trend, according to preliminary data from the statistics office KSH on October 5.

The expansion was supported by new automotive capacity and stronger electronics output, while battery manufacturing remained in decline.

Improving business confidence and order-book trends point to continued growth, although the recovery could remain concentrated in a limited number of sectors, analysts said, adding that stronger-than-expected external demand could provide an upside surprise, while energy prices and geopolitical risks remained downside risks. The key challenge for Hungary’s industry is whether the recovery could spread beyond the few sectors currently driving growth.

Industrial output is now just 0.9% below its 2021 average, suggesting a sustained turnaround may be emerging after more than three years of decline and recession, financial website Portfolio.hu writes. The sector’s output rose 3.4% in the first eight months of the year.  

ING senior analyst Peter Virovacz said the data represented a significant positive surprise, as a monthly decline had been expected. The annual growth rate was the strongest since late 2022, while output was now just 0.9% below its 2021 average, suggesting that the industrial sector may be emerging from more than three years of decline and recession.

Virovácz cautioned, however, that the recovery remained uneven, with growth driven primarily by the automotive and computer, electronics and optical products sectors. Most other manufacturing segments recorded declines, including electrical equipment and food production.

The KSH’s decision not to cite the energy sector as a drag was also a positive surprise, suggesting the impact of the temporary shutdown of the Paks and production cuts was smaller than expected. Detailed data may still change the picture, according to Virovacz. Danube riverbed construction likely boosted the small mining and quarrying sector.

ING expects Hungary’s industry to grow 3-4%.

In a Facebook post, Istvan Kapitány said the August figures were particularly encouraging, with industrial output growing for the third month in a row. He said the improving trend suggested business confidence was coming back and companies were becoming more willing to plan investments and production.