Hungarian industry regains ground despite strong headwinds
Lead — The latest industrial data from Hungary indicates a resilient manufacturing sector that is regaining momentum despite significant headwinds. Per the full note from ING, July's 4.7% year-on-year increase in industrial production reflects a recovery trend bolstered by investments in AI technology and improved performance from electronic suppliers. This rebound is critical as Hungary continues to recover from years of economic challenges, and it positions the country favorably on the path to sustainable growth. With the Hungarian forint closely tied to these economic indicators, traders should stay vigilant as these developments unfold.
What the desk is arguing
The desk believes that Hungary's industrial recovery could lead to a strengthening of the forint, fueled by a notable uptick in production numbers. The data shows a solid 1.7% month-on-month production growth in July, highlighting a broader positive trend that is emerging after a period of volatility, as indicated by the previous dip in June. Per the full note , this growth is primarily driven by the ongoing AI investment boom, setting the stage for further improvements in the economy.
With the July production indices showing a significant uptick from previous figures, the desk emphasizes that structural changes are crucial for the long-term potential of Hungary's manufacturing sector. The fact that July's production index nears the 2021 averages is a positive sign, with a decrease in the lag to just 2.2% as of July, which underscores the potential for further gains in production levels and, consequently, economic stability.
Where it sits in our coverage
Currently, market consensus reflects a target for the Hungarian forint against the euro (EUR/HUF) around 1.075 with a range between 1.04 and 1.12. Notable firm targets include: - jpmorgan: 1.10 for Mar26 - bofa: 1.04 for Mar26
This outlook aligns with our desk's call, as the estimate of 1.075 situates itself solidly within the expected range, reflecting general market optimism alongside solid economic data.
How other firms see it
Firms that align with this optimistic view, like jpmorgan, anticipate a favorable outlook for the forint, supported by the recent industrial performance. In contrast, bofa provides a more cautious stance, projecting a lower target at 1.04, indicating potential concerns over longer-term structural challenges.
Traders should note that this perspective on Hungary's industrial resurgence may also correlate with regional performance indicators, including the EUR/USD movement and the forthcoming decisions by the European Central Bank regarding monetary policy adjustments.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Hungary's industrial production grew 4.7% YoY in July, highlighting a positive trend.
- 02AI investments and electronics suppliers are crucial for this resurgence.
- 03The forint may strengthen as a result, given the optimistic outlook.
- 04Structural changes are necessary for sustained long-term growth.
Market implications
Traders should monitor the EUR/HUF pair closely, specifically looking for movement towards the consensus target of 1.075. A stronger production outlook could result in increased volatility in the currency markets, potentially impacting trading strategies aligned with the forint's performance.
Risks to this view
The call could be invalidated if new data shows a reversal in production trends or if external economic factors, such as a worsening European economic outlook or tightening monetary policies, adversely impact Hungary's manufacturing sector.
Older quick take Quick take Published 10:21 Hungarian industry regains ground despite strong headwinds Industrial data for July showed that the positive overall trend in Hungary has continued. Following the boom in AI investment, electronic suppliers are still performing well. Short-term growth looks secure, but structural changes are needed to unlock long-term potential Production and electronics orders are performing well in Hungary as a result of the AI boom Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Peter Virovacz Chief Economist, Hungary Zoltán Homolya Economic research trainee 4.7% Industrial production (YoY, wda) ING estimate: 5.0% / Previous: 4.1% In line with market consensus, the Hungarian industry made a positive start to the third quarter.
In turn, the familiar up-and-down pattern continued in July: a strong month was followed by a weaker one, and vice versa. Following a weak June, a stronger July was anticipated. In July, industrial production volume grew by 1.7% on a monthly basis, broadly in line with the consensus.
The year-on-year index, adjusted for working days, showed a 4.7% increase, improving significantly from the previous month's data. Since growth in July exceeded the decline in June, it can still be said that the sawtooth pattern is unfolding against the backdrop of an upward trend. As a result of this ongoing positive trend since the end of 2025, the fixed-base index, measured against the 2021 average, shows a lag of just 2.2% as of July this year.
We are therefore slowly but surely approaching the monthly production average for 2021. This is welcome news after more than three years of decline and recession. Volume of industrial production Source: HCSO, ING "> Source: HCSO, ING Since this is a preliminary data release, many details have not yet been disclosed by the Hungarian Central Statistical Office (HCSO).
Based on the commentary, however, the usual process is underway. With the addition of new capacity from transport equipment, production is performing well, as are electronics orders, which are surging due to the AI boom. However, aside from these, production volumes have declined year-on-year in most sub-sectors, including the significant battery and food manufacturing industries.
Performance of Hungarian industry Source: HCSO, ING "> Source: HCSO, ING Soft indicators, which are based on surveys, suggest that the improving trend will continue. Although we believe we are going to see a downturn in August, presumably as a result of the energy crisis (the almost full shutdown of the Paks nuclear power plant) and voluntary production restrictions, the business confidence index shows an improving trend. It is expected that the Hungarian industry will perform poorly in August, but a recovery may follow in September.
In other words, the sawtooth pattern may persist, and based on order books and capacity utilisation indicators, the upward trend may continue. In terms of risks, the European economy’s better-than-expected resilience to shocks could lead to a positive surprise in the form of a recovery in external demand that is more dynamic than expected. Conversely, surging oil prices back towards $100, rising gas prices to around €75, and supply chain issues caused by the Strait of Hormuz pose downside risks.
Manufacturing PMI and industrial production trends Source: HALPIM, HCSO, ING "> Source: HALPIM, HCSO, ING Looking further ahead, the Hungarian vehicle industry may also face major transformations in the wake of the recently announced and planned layoffs in the European auto industry. The loss of the European automakers' global market share and declining demand necessitate long-term adaptation. One way out of this situation could be to attract investments in the industrial and service sectors with higher added value.
However, this will become a much more pressing issue towards the end of the 2020s. Focusing on the nearer future, despite temporary disruptions, the industrial sector could end 2026 on a positive note, achieving annual average growth of around 3-4%. After three years of industrial recession, the sector could therefore make a positive contribution to GDP growth once again, despite geopolitical and energy market turbulence.
Manufacturing PMI Industry Industrial production Hungary GDP growth Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Older quick take
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