Slight Increase in Economic Sentiment Index

After a shock-like fall in the outlook for domestic economic agents in April, there was a significant positive correction in May and June, according to GKI’s economic sentiment index.

The economic sentiment index, prepared by the economic research institute GKI, rose only slightly in July, by two points, as a combined result of improving expectations of consumers and business services, and stagnant expectations of other sectors. The consumer confidence index rose by 6 points this month and the business one by just one point compared to June.

The value of the business confidence index in July corresponds to its level at the beginning of 2013. Industry is having a hard time restarting. Its confidence index remained essentially unchanged in July compared the previous month. Although the assessment of the stock of orders improved, the outlook for production deteriorated. Construction expectations did not change significantly either. The assessment of construction output in the preceding quarter and that of orders also became slightly worse. The trade confidence index improved only within the statistical margin of error. Although the assessment of sales position and inventory improved, that of expected orders deteriorated. Among services, theassessment of the overall business performance of the recent period and that of sales expectations in the coming months also moved in a positive direction.

The willingness of the business sector to employ improved somewhat in July. There are already slightly more companies planning to increase the number of employees in trade and services than companies planning a decrease. However, the latter are still in the majority in industry and construction. Fear of unemployment eased significantly among households in July; however, the picture was much worse than before the pandemic. Intentions to raise prices was stronger only in industry, whereas they weakened slightly in other sectors. The assessment of the Hungarian economy’s prospects improved markedly in July as well, and the outlook for all sectors improved, except in industry. The assessment provided by consumers also became slightly more upbeat.

After the largest fall in April since the measurement began, the value of GKI’s consumer confidence index corrected significantly in May, and then at a slower pace in June and July. The index rose by 11.3 points in May due to the slow mitigation of the coronavirus epidemic and the easing of the strong uncertainty in April, then increased further by 5.7 points in June and by 5.9 points in July (seasonally adjusted), eliminating 61 per cent of its overall fall in April. The index is currently at its level measured in autumn 2015. All four sub-indicators of the consumer confidence index improved in July. Households assessed their financial position and their expected savings capacity moderately improving. The latter indicator is already slightly above its February level.