Hungary PMI Shows Expansion as Cabinet Sees 2013 Growth

Hungarian manufacturing expanded the most in 10 months in January, reinforcing the government’s forecast that the economy will return to growth in 2013 after a recession last year.

The purchasing managers’ index, as reported by 100 manufacturing companies, jumped to 55.9 points from a revised 49.1 points in December, MLBKT, the company which compiles the data, said in a report today. That’s the highest since 57.7 points in March 2012.

Hungary is battling its second recession in four years as government policies damage investor confidence and trade and banking links with the slumping euro area drag down growth. The economy shrank for a third consecutive quarter in the July-September period.

The economy may get a bigger-than-forecast boost from agriculture and car production this year, which may lift gross domestic product by more than the 0.7 percent to 0.9 percent growth rate the Cabinet currently estimates, government spokesman Andras Giro-Szasz told state-run MR1 radio on Jan. 25.

The forint strengthened 0.4 percent to 291.68 by 9:07 a.m. in Budapest, advancing for a fourth day. The benchmark BUX stock index was little changed at 19,370.53.

The economy will expand 0.3 percent this year and 1.3 percent in 2014 after contracting 1.2 percent last year, according to the European Commission.

Agriculture, Cars

Both agriculture and car output will be helped by a low base in 2012, Giro-Szasz said, citing extreme weather conditions that destroyed crops last year as well as plans by carmakers to boost production this year from 2012 levels.

Daimler AG’s Mercedes factory started production of its CLA model, a four-door coupe, exclusively in Hungary last month, Chief Executive Officer Dieter Zetsche said in the central Hungarian city of Kecskemet on Jan. 25.

The PMI index is a weighted average of five indexes: new orders, production volume, employment, transportation time, and purchased inventory. A reading below 50 indicates a contraction in output.