Slight Rise in the Economic Sentiment Index

In January, GKI’s economic sentiment index rose marginally, but for the third month in a row. According to the empirical survey conducted by GKI Economic Research Co. with the support of the EU, the overall improvement in the consumer confidence index during this quarter is still within the statistical margin of error and remains below the panic levels seen at the onset of the Covid pandemic.

The rise in the business confidence index is slightly more noticeable, at a level broadly similar to two years ago. Both companies and households were much more optimistic about the outlook for the Hungarian economy than in December. Their inflationary expectations fell, while their perception of the employment situation worsened. (From January 2023 onwards, GKI carries out the seasonal adjustment according to the EU methodology with a new program, which slightly modified the historical data.)

 Within the business sphere, all sectors except industry became more optimistic to a greater or lesser extent in January. In industry, the assessment of order books and inventory levels worsened, while that of recent production and production prospects improved. Companies also saw their export orders as more favorable.

The construction confidence index rose by four points in January, reaching its four-month high. The prospects of companies both in structural and civil engineering improved. Although the assessment of production in the preceding three-month period remained unchanged, that of orders improved noticeably.

The trade confidence index also hit a four-month high in January. The assessment of sales positions improved most of all, but that of expected orders and inventory levels was also seen as better by respondents. The services confidence index essentially stagnated in January. Overall business sentiment was unchanged, with expectations for turnover up and the previous month’s turnover and headcount down.

In January, the propensity to employ fell overall, including in industry and services, but picked up slightly in trade and construction. Thus, there are still slightly more companies planning to downsize than to expand. Labor shortages are once again the main obstacle to expanding production in industry, second in construction and third in services. Fear of unemployment by households intensified slightly.

The intentions of the business sector to raise prices slowed down significantly in January, and only in trade were more than half of the companies preparing to raise prices. The inflationary expectations of consumers eased slightly. The assessment of the future state of the Hungarian economy became much more optimistic in January than in previous months, especially among companies, but also among households.

The GKI consumer confidence index barely changed in the last quarter, following a significant deterioration in May-October, and remained essentially stagnant in January. Compared to the previous month, households felt that their own expected financial situation was slightly worse, while their perception of their ability to save for the future remained unchanged. Households considered the current possibility of purchasing high-value durables declining, whereas their expectations for the next 12 months were improving.