Hungarian consumers are hyper-optimistic

In the business sector, expectations in construction and especially in services improved, whereas industrial and trade confidence indices fell, although they still reflect a great deal of optimism

The industrial confidence index dropped to its lowest point in the last five months in April. The assessment of the production of the preceding period, the stock of orders (including exports) and inventories deteriorated as well. Only production prospects improved.

In construction the confidence index increased slightly in April after its two-month drop. Expectations of structural engineering companies deteriorated compared to the previous month, whereas those of civil engineering firms improved significantly. Although the assessment of production in the preceding three-month period declined noticeably in April, that of orders improved slightly.

The trade confidence index fell back to its September 2017 level in April. Although the assessment of sales positions and the stock of orders became worse, that of inventories picked up.

In April, the services confidence index reached again its historic peak registered in January. This was mainly due to the favourable opinion on the general business climate as sales expectations stagnated.

The willingness to employ strengthened in all sectors, mainly in trade and least among service companies. The main obstacle to growth continues to be labour shortages: half of the companies surveyed in construction and one-third in industry and services mentioned this problem.

At the same time, the fear of unemployment of households has never been as low as it is now, in April.

Intentions to raise prices weakened in all sectors except construction, and inflationary expectations decreased significantly among consumers as well. The assessment of the perspectives of the Hungarian economy deteriorated in industry and among households, whereas it deteriorated slightly in other sectors.

Although the consumer confidence index of GKI rose for the fifth month in April, it was still somewhat lower than its peak in 2002. Households assessed their financial situation and savings capacity for the future slightly better than in March, and they considered the possibility of purchasing high-value durables to be slightly worse.

Election cyclicality is evident in the consumer confidence index. Every four years, the index jumps and then falls sharply. It will be interesting to see whether a similar pattern will materialise now, since the correction might not take place as a result of a rapid wage increase and the expansion of consumption opportunities.

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• gki,
• economy,
• sentiment,
• business confidence,
• consumer confidence