Tuesday, October 7, 2008

Hungary, Romania output drops as Europe's growth slows

BUDAPEST, Oct 7 (Reuters) - Industrial output in Hungary and Romania dropped in August due to waning euro zone demand for their exports, and analysts said the tightening grip of the global economic crisis made for an increasingly bleak outlook.

Hungary's output dropped by 5.9 percent versus a year earlier, according to unadjusted data. Working-day adjusted figures showed a 1.2 percent drop, the central statistical office KSH said on Tuesday.

In Romania, output in August fell by 1.5 percent compared to a year earlier and 8.7 percent from the previous month.

"Industrial production (in Hungary) was very weak, although the working-day adjustment helps a bit. But a 6 percent decline is massive," K&H Bank economist Gyorgy Barcza said.

"This suggests that we have had a 'sudden stop' in industry, which could foreshadow that growth will be much weaker from the third quarter."

The 5.9 percent drop was also well below expectations for a 1.8 percent decline in a recent Reuters poll.

Output fell as European Union demand for Hungarian-made cars and appliances continued to drop and the two key segments produced stagnating or slightly lower output figures while domestic demand remained flat, the KSH said.

KSH statistician Miklos Schindele said the August trends were similar to previous months' and there did not appear to be any dramatic halt in production.

But analysts remained negative on the region's prospects as Europe's economic slowdown is expected to drag growth lower.

"Looking forward, the prospects are deteriorating," Takarekbank's Gergely Suppan said. "Germany's Ifo index and other figures from Europe and the region show that the prospects are worse and worse every month."

In Romania, analysts said Europe's slowdown is feeding into local numbers more quickly than expected.

"The negative news came much faster than expected, and it shows the impact of euro zone's slowdown is direct and fast, which Romania cannot avoid," said Nicolaie Alexandru-Chidesciuc, senior economist at ING Bank in Bucharest.

"This is just the beginning, and in the next six to nine months we cannot expect data to turn positive."

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