Hungary July Industry Output Expands More Than Forecast

Hungary’s industrial output rose more than economists estimated in July, with the increase magnified by a production drop the previous year.

Output rose a workday-adjusted 2.5 percent in July from a year earlier, the Budapest-based statistics office said in a preliminary report today. The median estimate of eight economists in a Bloomberg survey was 2.2 percent. Production rose 0.3 percent from June.

Economists are stepping up forecasts for Hungary’s economic growth as the central bank keeps cutting interest rates, a survey of economists showed last week. The expansion in industrial production is “veneer” as the increase was mostly a result of the base-effect after a plunge in output in July 2012, statistician Miklos Schindele told reporters today.

“We can’t say that industrial production has really gotten off the ground,” Schindele said. “It’s just crawling.”

The forint strengthened 0.2 against the euro to 301.25 by 9:54 a.m. in Budapest. The currency lost 1.1 percent in the past three months.

Higher agricultural output lifting domestic sales, growth in the chemical industry and car production contributed to the industrial expansion in July, Schindele said.

Prime Minister Viktor Orban, who faces an election next year, sacrificed growth to keep the budget gap within the European Union limit of 3 percent of gross domestic product and protect funding from the bloc, which account for 97 percent of infrastructure development financing. Hungary exited the EU’s excessive-deficit procedure for budget offenders this year for the first time since joining the EU in 2004.

The economy suffered its second recession in four years in 2012. GDP advanced 0.1 percent in the second quarter from the previous three months after rising 0.6 percent in the January-March period.

The economy will grow 0.5 percent this year versus a 0.2 percent drop predicted earlier, according to the median estimate of 30 economists in a Bloomberg survey.