Hungarian supply chain issues drag down industry

After a series of month-on-month contractions, the first month of 2021 broke the bad streak as industrial production increased by 0.2% month-on-month in January.

The fact that production was able to rise is a huge surprise. We all knew that car manufacturing faced supply-side constraints as there was a shortage in semiconductors and chips, triggering shutdowns and fewer shifts. Even with that burden, industry was able to come up with a positive performance.

On the other hand, this growth is nearly not enough to elevate the year-on-year performance, nor is it really supportive when it comes to GDP growth. Industrial production was down by 6.7% on a yearly basis in January. However, the whole picture includes that in the first month of 2021 the number of working days was two days less than a year ago, so calendar effects played a big role too.

As usual, the recent data released by the statistical office didn’t contain any detailed figures.

The press release highlighted what we suspected: almost all of the subsectors performed poorly, showing a drop in production. The only important exception is electrics, which grew, and is responsible for the upside surprise in January. Car manufacturing registered a significant downturn and the food industry also closed the first month with negative performance.

Looking forward, this January performance won’t be enough to counterbalance the expected problems in the short run. First of all, the supply chain issues haven’t really eased in car manufacturing, causing the sector to run well below the maximum capacity, which means a drag on other suppliers too. Electronics are likely to remain a silver lining, but another lockdown from March onwards certainly won’t help. Manufacturers can remain open, but schools will be closed and as we saw during the first wave, working from home is just not an option for people working in these sectors. This can cause temporary workforce issues, forcing manufacturers to further decrease working hours.