| GKI Economic Research Co.

Economic expectations hardly changed in June

June 23, 2014

After one and a half years of spectacular rise, the GKI-Erste economic sentiment index adjusted for seasonal effects reached its fifteen-year peak in April. According to the empirical survey conducted by GKI with the support of the EU, after a decrease in May, expectations improved slightly in the business sector in June, whereas the consumer confidence index continued to decline.

GKI finds that as far as
the business sector was concerned, trade and especially industrial expectations
deteriorated in June, whereas expectations in construction and particularly in
services improved. In June, following two months of decline, the industrial
confidence index rose to a relatively high level reached at the beginning of
the year. The assessment of the production and the stock of orders (including
exports) of both the preceding and the next period deteriorated, whereas stocks
were considered somewhat higher by respondents.

In June, the
construction confidence index rose again to its April level. Opinions over the level
of production and the stock of orders in the preceding three months improved,

considered the level of stocks slightly declining in trade, whereas the
assessment of sales positions deteriorated somewhat, and that of expected
orders strongly. Optimism of service companies reached this year’s peak. The
assessment of expected turnover improved most of all, and the evaluation of the
general business became more favorable as well.

intentions of employment in industry remained unchanged; they improved in
construction and especially in services, whereas they weakened significantly in
trade. The ratio of those planning increase in employment exceeded the ratio of
those intending reduction in all sectors with the exception of trade. The fear
of unemployment by households picked up. In June the ratio of construction
companies predicting lower prices continued to exceed those forecasting higher
ones. Now this was the case in industry as well.

intentions to raise prices in trade remained unchanged, they strengthened in services.
The inflationary expectations of consumers eased significantly. The assessment of
the Hungarian economy's prospects in industry and particularly in services
improved, it did not change in construction, whereas it deteriorated in trade
and among consumers.

After its
peak in April, the GKI consumer confidence index dropped in May, and it
declined further slightly in June. Households assessed their financial
situation for the following year worse than in May, whereas the assessment of
the savings capacity expected in the next year improved significantly.
Households considered the possibility of purchasing high-value durables more favorably,
as well.


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