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Tuesday, December 26, 2006

Hungary Vital Events 2006

The latest edition of the Hungarian CSO "Vital events" (January-October 2006) is now out, and it contains the following interesting information:

In the first ten months of 2006 the degree of population decline was much lower than in January-October 2005. The number of live births moderately increased, but there were significantly fewer deaths than one year before. Slightly fewer couples got married than in the same period of the previous year.

Looking at the above chart (where the thick solid line represents deaths, while the thick dotted line represents births, which are, of course consistently below deaths, a situation which has been going on since around 1990) my first response is that this is what I had feared.

Now I need to be careful here, since what I had feared is that the Hungarian population has started declining more slowly of late, largely due to a reduction in the number of deaths, rather than a significant and sustained increase in births. Obviously the fall in the number of deaths is GOOD news, but if this is the only way the population stabilizes, then the economic impact will be substantial and very negative.

For the sorts of reasons I have been recently arguing on Demography Matters, Hungary badly need a significant influx in immigrants, and immigrants who preferably come from countries where there is still relatively high fertility (eg Ukraine, Moldova, Russia, Serbia etc are not the best sources, since they also have near rock bottom fertility). Which is why Hungary badly doesn't want a short term economic crisis. Unfortunately here, what will be will be.

Basically as I argued in my Ferenc Puskás post most of the people who are living longer (and will be living longer in the future) have already stopped work, and this upward movement in life expectancy is going to be medically driven (rather than coming from better food, or from a healthier lifestyle etc) so the increase comes with a big price tag, and to pay this you need lots more young people working. This is the difficulty.

Having said all this there was a big spike in deaths in early 2005, so the drop in deaths may not be as large as it seems, otoh in secular terms, with life expectancy almost bound to rise, this is the direction we should expect to see things moving.

At the end of the day there are not only less people alive in Hungary in October 2006 compared with October 2005, but those people are, on average, older. It is this trend that it would be nice to try and stabilize a bit.

To understand all this it is important to have both quantum and tempo effects clear in your head for both births and deaths.

Birth postponement and increase in life expectancy operate together to produce both 'missing births', and 'missing deaths', and this twin phenomenon gives a rather illusory situation where the actual numbers you see really don't mean too much.

Now according to the first article in this piece, mean age at first birth in Hungary is still very low ( 22.4 - 23.9 range, you can also find more material on tempo and quantum in this document). Now since the EU norm in terms of first birth ages is fast moving towards the 30 mark, this means Hungary has considerable postponement out there in front of it, and probably a couple of decades of 'missing births' which can do untold damage to the population pyramid (which is already in none too good shape).

Add to this that we can expect a pretty intense increase in life expectancy, and you can see that the combined effect will be a very rapid increase in the median age. I can't do the math in my head, but I think this is clear.

Also if we look at the live births data, the peak generation was probably the 1970 -ish one, but that the cohorts before this (1960s, 1950s, 1940s) are probably also pretty large.

Now given the low first birth age we could imagine that it is the cohort born around 1980 (which was still pretty big) which are now having their children (in the main - or should I say child). Now if we fast forward to 2025 then even if fertility doesn't change, and even without allowing for postponement, births could be down 25% in absolute terms due to the lower number of potential parents, while imagining that the rate of increase in life expectancy might slow at some point, the missing deaths will come online. This is how population 'meltdown' works, and it is most definitely a non-linear phenomenon.

All in all then, hardly encouraging news.

Sunday, December 17, 2006

Savings In Hungary

One worrying feature of Hungarian society, people don't have too many accumulated savings to draw down as they age:

As many as 81% of Hungarians have no financial investment whatsoever and the majority of their existing investments are in short-term bank deposits, according to the latest market research of GFK Hungária Kft released on Friday.

A total of 40% of consumers surveyed said they were expecting to save significantly less next year and only 2% said they would be able to save significantly more. Around 31% expect to be able to save as much as before and 23% said savings would probably decrease slightly in the next 12 months.

Saturday, December 02, 2006

Hungarian PMI November

Hungary's seasonally adjusted Purchasing Manager Index (PMI) dropped to 51.7 in November, this was a reduction of 2.7 from the October reading which was 54.8, according to the Hungarian Association of Logistics, Purchasing and Inventory Management (HALPIM), the publisher of the index. Since any reading over 50 means that output is still expanding this is still not a contraction reading, but it is hardly good news since it means industrial output (and in particular output for exports) is slowing, just what isn't needed at this point: