Still on the border: manufacturing growth slowed in May

Weak momentum and waning confidence

According to the latest report by the Hungarian Association of Logistics, Purchasing and Inventory Management (MLBKT), the slight growth seen at the beginning of the year continues to stall. Although the PMI is still above the 50-point growth threshold, the May reading falls short of the long-term average for this month (52.4) as well as the average of the past three years (52.6).

Most sub-indices declined, and six components dropped into contraction. Notably, the employment index fell sharply—by 5.8 percentage points—dipping below 50 and indicating a downturn. New orders and purchasing volumes also declined by 3.5 and 1.7 points respectively, compared to the previous month.

Industrial slowdown continues

After a moderate upswing in spring 2024, a slowdown has been observed in the Hungarian manufacturing sector since June last year. Although November and December showed signs of temporary recovery, the downward trend resumed in May.

The production index slightly improved (+2.8 points), but both purchased inventory and finished goods inventory continued to decrease. Particularly concerning is the inventory index, with finished goods registering the seventh lowest May figure since 1995.

Rising prices and material shortages

Procurement prices rose by 4.0 percentage points. Respondents reported price increases for steel, aluminium, cardboard packaging, pork, and electric wires. Meanwhile, shortages were noted in steel, wood, metal parts, and integrated circuits. On the other hand, prices fell for some materials, including semi-finished goods, tin, and polypropylene.

Mixed signals from foreign trade

Among external trade indicators, the export index remained in contraction, while the import index rose slightly by 0.4 points, indicating renewed expansion. Overall, foreign trade dynamics in the manufacturing sector remain volatile, continuing a trend of fluctuation seen since late 2022.

Methodology and significance

The PMI is a composite index based on the weighted average of five sub-indices: new orders, production, employment, supplier lead time, and purchased inventory. The index is calculated monthly using responses from 100 purchasing managers within the domestic manufacturing sector. A reading above 50.0 indicates growth; below 50.0 signals contraction.

The PMI is compiled by Ingenium Alliance on behalf of MLBKT, and the monthly Business Reports based on the survey results remain a key indicator for assessing economic trends.