In February, both business and consumer expectations improved, but continued to reflect a poor mood. According to the empirical survey conducted by GKI Economic Research Co. with the support of the EU, consumers were still more pessimistic than they were in 2020, during the panic that started when the new coronavirus pandemic broke out.
In comparison, business sector expectations were more favorable, broadly in line with the end of 2020. Service companies were now the least pessimistic, while industrial companies were the least pessimistic in January. The perception of the employment situation changed little, but companies’ efforts to raise prices and consumers’ inflationary expectations declined markedly. The improvement in the business confidence index was mainly due to a sharp rise in expectations in services, while pessimism in industry rose again, and there was no significant change in construction and trade. The industrial confidence index fell slightly in February.
The assessment of incoming orders (including export orders) declined, whereas that of inventories and production prospects remained unchanged. Production of the last period was also seen as worse by respondents. The sentiment of construction companies was essentially unchanged (within the statistical margin of error) compared to January. Expectations of structural engineering companies deteriorated slightly, whereas those of civil engineering ones improved somewhat.
In construction, both satisfaction with production in the previous three months and the assessment of incoming orders also deteriorated slightly. Expectations in trade had been improving for four months, but it was still the most pessimistic sector. Although the assessment of sales positions and expected orders improved slightly in February, that of inventories deteriorated. In services, the assessment of the state of business and turnover in the past and the coming period also improved.
In February, companies’ propensity to hire increased within the statistical margin of error, with almost the same proportion of companies planning to increase and decrease their workforce. There was an improvement in services and construction. However, fear of unemployment by households increased slightly. After January, the intentions of the business sector to raise prices slowed down significantly in February, with only a third of companies, including commercial enterprises, preparing to raise prices.
Six months ago, this ratio was two-thirds. Intentions to raise prices were the strongest in construction. The inflationary expectations of consumers eased significantly. After a big improvement in January, the assessment of the situation of the Hungarian economy became slightly more optimistic in February in all sectors and among consumers as well.
The GKI consumer confidence index, after a significant deterioration in May-October 2022, barely changed with some fluctuations, and then increased noticeably in February 2023. However, it still reflected marked pessimism. In February, households felt that their own financial situation and ability to save was better than in January. Households considered the current possibility of purchasing high-value durables declining, whereas their expectations for the next 12 months were improving.
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