Business Expectations No Longer Improved in June

After an unprecedented rise in April, the GKI economic sentiment index continued to as-cend in May and June, but most recently only within the statistical margin of error. This brings the index back to its level at the beginning of last year preceding the pandemic. 

According to a survey conducted by GKI Economic Reserarch Institute with the support of the European Union, although business expectations regained earlier optimism faster already in May, they became slightly more pessimistic this June. However, the consumer confidence index continued to rise marked-ly in June, almost reaching its pre-crisis level.

In the business sector, industrial and construction expectations worsened in June, whereas those for trade improved and those for services remained unchanged. There are now slightly more companies that are optimistic overall than pessimistic, with the only exception of trade. Construction and industrial companies are the most optimistic. The decline in the industrial confidence index in June was caused by weaker production expectations.

The assessment of orders, including export orders, and production in the preceding period improved, while that of inventories stagnated. The outlook for construction companies improved sharply in April, but has essentially stagnated since then: the sector’s confidence index rose within the statistical margin of error in May and fell by a similar amount in June. In June, expectations of structural engineering companies slightly deteriorated, whereas those of civil engineering ones hardly changed. The assessment of production in the previous quarter was significantly better, but the assessment of order books was somewhat worse. The trade confidence index continued to rise slowly in June, following a significant increase in April and a minor growth in May. The assessment of sales positions picked up slightly, whereas that of orders and stocks turned somewhat worse. The services confidence index remained unchanged in June. Although the evaluation of the general business climate and the turnover in the last period improved, sales expectations weakened.

The business sector’s propensity to hire remained broadly unchanged after the spectacular improvement in April, with a slight moderation, but still more companies in all sectors were preparing to expand than reduce their workforce. In June, mainly the employment outlook for trade and services companies became weaker, and these companies were the most cautious before that as well. After four months of improvement, the fear of unemployment of households rose again in June. Intentions to raise prices increased in all sectors with the exception of trade. However, the intention to raise prices is still the strongest in trade, and most of these companies are preparing to raise prices. At the same time, consumer inflation expectations declined in June, after a strong increase in May. As in May, the assessment of the future of the Hungarian economy became noticeably more favourable in all sectors except trade, especially in services. The opinion of households also improved noticeably.