GKI Economic Sentiment Index Rose Markedly in March

Both business and consumer expectations improved significantly in March, with GKI’s economic sentiment index rising for the fifth month in a row.

According to a survey conducted by GKI Economic Research Co. with the support of the EU, in the business sector expectations of industrial and service companies improved significantly, while expectations in construction and trade deteriorated noticeably, but to a lesser extent. Consumers were no more worried than they were in 2020, during the panic of the Covid outbreak.

However, pessimism was still very strong. In March, companies’ efforts to raise prices declined substantially and their willingness to employ increased, as confirmed by consumer sentiment. The evaluation of the state of the Hungarian economy became much more positive than in February, both in the business sector and among households.

In recent months, the mood in the business sector was rather mixed. In March, the industrial confidence index rose significantly compared with February, reaching its September level. The assessment of the production of the previous quarter and the expected output and the stock of orders (including export orders) improved, whereas that of inventories deteriorated slightly. Expectations in construction, on the other hand, became much more pessimistic, reminiscent of the period of the Covid pandemic.

The outlook for structural engineering deteriorated more markedly and that for civil engineering more slightly compared with February. There was not much difference between the opinions of the two sectors, but the latter were the more pessimistic. In construction the assessment of production in the previous quarter hardly changed, whereas that of orders dropped markedly.

The trade confidence index fell in March after a two-month rise. The assessment of sales positions and expected orders remained unchanged, whereas that of inventories dropped markedly. After a huge jump in February, the services confidence index continued to rise in March, and was the only sector to return to positive range. Respondents were more positive than in February about the overall business climate and turnover in the past and

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In March, companies’ propensity to hire strengthened for the fifth month in a row, and although the month-on-month improvement was minimal, the share of companies planning to expand was again slightly higher than the share of those planning to cut. All sectors showed improvement in March. The fear of unemployment of households eased, too.

March saw a continuation of the significant slowdown in the intentions of the business sector to raise prices, which was ongoing for months, with only a quarter of companies, including commercial enterprises, preparing to raise prices. In August last year, this ratio was two-thirds. Intentions to raise prices were the strongest in construction. Inflationary expectations of consumers decreased further slightly. In March, the assessment of the perspectives of the Hungarian economy continued to improve in every industry and among households as well. After February, GKI’s consumer confidence index rose significantly in March. In March, the assessment of households’ own financial situation improved significantly compared to the previous month, while their ability to save improved slightly. Households perceived both current and future purchasing opportunities for high-value consumer durables to be improving.