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Tuesday, March 18, 2008

Hungary Construction Output January 2008

Hungarian construction resumed its long march downwards in January, since year on year output plummeted by 27.4%, according to both unadjusted data and figures adjusted for working days, according to data from the Central Statistics Office (KSH) this morning. This follows the 20.8% yr/yr decline in Decmber and a 4.0% fall in January last year. There was a 5.9% rise in output month on month over December according to seasonally and working day adjusted data. Thia compares with a 1.4% m/m rise in December over November, and a 1.1% fall m/m in January 2007. So there is some slight improvement in the underlying trend, although it would be very premature to attribute any importance to this at this stage, since all sorts of factors - like the weather, and this winter being milder than the last one or whatever - can be having an impact here.

To get a better picture of what is happening we could look at the quarterly construction activity index over the last few years, where - if we take a glance at the chart - we will see that total activity peaked sometime in 2005, since which point the overall trend has been steadily down, and I see no compelling reason why that tendency is likely to change anytime soon.

Now for the details. According to the KSH release:

The building of complete constructions was down by 31.6% yr/yr in January, and this compared to a 28% drop in December and a 14.3% decrease in January 2007. Building installations were down 12.7% yr/yr in January as compared with a 3.9% fall in December and a 16.8% jump in January 2007. Completed buildings dropped by an incredible 43.7% yr/yr, as compared with a 1.9% fall in December and an 18.1% rise in January 2007.

The stock of orders at the end of January (HUF 674.8 bn at current prices) was down by 29% from a year earlier. The stock of orders for buildings (which totalled HUF 334.7 bn in Januray) was down 15.5% yr/yr, which compares with a rise of 9.4% in December and a rise of 6.9% in January 2007. For civil engineering the stock of orders was down 38.6% yr/yr (to HUF 340.1 b), which compared with a drop of 53.2% in December and a 46.1% drop in January 2007.

The volume of new orders in the construction industry as a whole (at HUF 129.1 bn) was up by 49.5% which compares with a 1.2% rise in December, and a sharp drop of 61.8% in January 2007.

The change in the stock of new orders for buildings was much less positive, as this was down by 24.8% in January, following a 4.3% yr/yr increase in December and a decline of 5.4% yr/yr in January 2007. New orders at current prices were down to HUF 42 bn from HUF 116.2 bn in Dec.

At far as civil engineering is concerned the picture was much brighter since there was a massive 185.6% leap as against a drop of 3.8% in Dec and a plunge of 81.8% in January 2007.

Unfortunatley this is the one-off impact of a major contract sealed in January for the extension of the M6 motorway. In this sense we can see why the increase in total orders look vaguely positive, since a one off civil engineering contract to some extent compensated for the continuing decline in domestic housing construction. This is liable to happen from time to time with the arrival of EU funding, but since the general fical direction is towards tightening we should not be expecting to much positive news in this department.

The value of total construction industry production was HUF 87.6 billion in January, down from HUF 205 bn in Dec and HUF 115.3 bn in January 2007.

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