Our latest indicators for Hungary's business sector (HUBE) still suggest that the economy is slowing despite surprisingly robust GDP growth in 3Q
Based on our Leading HUBE indicators, we suggested that the 3Q18 GDP reading would show some softening. The actual data has refuted this but we've not lost faith in our model.
We need to highlight that the Leading HUBE indicators don’t take into account the performance of the agricultural sector. According to the Statistical Office, agriculture was a key element behind the strong growth in 3Q18. The previous trend of growth of value-added outpacing growth of output in industry and construction seems to have continued.
Services exports are also out of scope due to the lack of high-frequency data, which might have provided an upside surprise.
Looking forward, our Leading HUBE indicators are pointing towards softening economic activity in the next six months. The month-on-month Leading HUBE index has fallen to a three-year low, hovering around zero and pointing towards a turnaround in economic momentum. The year-on-year indicator has also moved further downward, reaching a level not seen since mid-2016.