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Hungarian, Czech Industrial Output Growth Shows Faster Recovery

Hungarian and Czech industrial-output rose more than economists estimated in November on increased demand for the countries’ exports, indicating eastern Europe’s economic recovery may accelerate.

Hungarian production advanced an adjusted 14.5 percent from a year earlier, the fastest in three months, compared with the median estimate of 8.6 percent in a Bloomberg survey of six economists. Czech output rose 15.9 percent, the most in six months. The median estimate of 12 analysts was 12 percent.

East Europe is recovering from the worst recession in the two decades since the fall of communism as consumers in the euro zone, the area’s biggest export market, buy more products made or assembled in the region, including Nokia Oyj phones and cars made by Volkswagen AG’s Audi and Skoda Auto units.

“The figures imply that fourth-quarter economic growth was vivid and that the acceleration of economic growth toward the 3 percent rate was continuing,” Janos Samu, an analyst at Budapest-based Concorde Securities Ltd., said in a report on Hungarian industrial production.

Germany’s recovery broadened last year as consumer spending strengthened and companies increased in Europe’s largest economy. Retail sales may have increased as much as 1.6 percent, the biggest gain since 2004, according to data released today by the Federal Statistics Office in Wiesbaden.

Industrial production growth in Hungary accelerated from October’s 8.3 percent rate and from 6.9 percent in the Czech Republic.

Maintaining ‘High Revs’

Hungary is looking to the euro region, which buys 60 percent of its exports, to spur economic growth after domestic demand was crimped by public spending cuts as the government sought to meet the terms of an International Monetary Fund-led bailout. The country’s economy grew an annual 1.7 percent in the third quarter after shrinking 6.9 percent in 2009.

The Czech Republic, where exports account for about 70 percent of gross domestic product, also returned to growth last year. Czech GDP expanded 2.8 percent in the three months through September, the fastest rate in nine quarters. The recovery was initially fuelled by exports and later accompanied by a rebound in domestic demand as manufacturers restocked inventories.

“The main source of persisting revival of industry remains foreign demand,” Patrik Rozumbersky, an economist at the Czech unit of UniCredit SpA, said in a note to clients. “Everything suggests that the smoothly working engine of Czech industry will maintain high revs for at least several coming months.”

The Hungarian forint, down 2.6 percent against the euro in the past 12 months, weakened 0.3 percent to 277.09 as of 1:10 p.m. in Budapest, according to data compiled by Bloomberg. The Czech koruna, which gained 6.7 percent against the euro in the period, strengthened 0.2 percent to 24.568.

Asian Risk

Business sentiment indicators for the Czech Republic and euro area, mainly Germany, suggest that positive developments in industry and exports will persist in the first quarter, said Radomir Jac, chief analyst at Prague-based Generali PPF Asset Management.

“We keep our call that Czech GDP growth will reach about 2 percent in 2011, that means above the forecast of the Czech central bank which stands at 1.2 percent,” Jac said.

Hungary’s economic outlook relies on exports to Germany, which, in turn depend on demand from Asia, Concorde’s Samu said.

“This fact provides a downside risk to economic growth in the medium term given a probable Asian slowdown in our view,” he said.

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