Report17 December 2018Updated 2 weeks ago

HUBE update: Sledging down the slope

We really don’t want to ruin the holiday season, but based on our Leading HUBE indicators, we see the Hungarian economy sledging down the slope

Executive summary

Based on our Hungarian Business Economy (HUBE) indicators, we believe the Hungarian economy has reached the peak, so we need to hold on and enjoy the sledging as long as we are not close to the end of the snowy road. We don’t expect the slope to be a black run, but it won’t be a beginner’s green either.

The continued pessimism is from the recent high-frequency data. Despite the fact, that industrial production has finally rebounded on electronics and cars in October; the trend is still pointing downward. The retail sector also posted a correction in October, but the growth rate was still below the average of 2018, and again, the trend is suggesting a prolonged period of slow down ahead.

The only remaining silver lining is construction as corporates increase capital expenditures and budgetary financed infrastructural projects go ahead. When it comes to the volume of contracts, it suggests that the sector will remain the key driver in 2019. We have positive news regarding the industry’s new and total stock of orders as both are showing expansion. Soft indicators were rather mixed but slightly skewed to the downside especially with regard to Hungary’s main export partner, Germany.

All in all, our Leading HUBE indicators decreased further, pointing to a loss of economic momentum in 2019. The month on month, Leading HUBE has been in negative territory for three months, sitting at its lowest level since 2015. Following the drop in this indicator into negative territory in 2015, Hungarian GDP growth weakened from 3.5% YoY in 2015 to 2.3% YoY in 2016. Speaking of annual figures, the latest annual Leading HUBE indicator also moved south, reaching a level not seen since mid-2016.