The GKI economic sentiment index rose in August from its two-year low in July as business expectations improved and consumer confidence rose to a one-year high, economic think tank GKI said on Monday. The rebound is remarkable given the declining global economic climate. June's industrial output and export data seemed to indicate that the global trend has finally reached Hungary, which had proven surprisingly resistant before that, but the latest data instead hints that the early summer slump was a one-off occurrence.
In August, expectations improved most in industry, and also slightly in service, while construction continued its declining trend of six months, although it still remains the most optimistic sector. The trade confidence index dropped to a three-year low in August.
After a two-month decline, the industrial confidence index rose markedly in August. The assessment of the production level, the stock of orders (including export orders) and stocks of the past quarter improved significantly. However, production expectations worsened.
In August, the construction confidence index came near its lowest point in the past two years. The prospects of companies in structural and civil engineering also declined. Assessment of production in the previous quarter hardly changed, whereas that of orders dropped sharply.
After its drop in July, the trade confidence index continued to fall, and it is in the lower zone of the relatively narrow band in which it had fluctuated for the past five years. The assessment of sales positions and stock levels became significantly worse, and after a sharp decline in the previous month, expectations concerning new orders also declined slightly.
The services confidence index, however, rose back to its April level. Although the evaluation of the general business climate did not change much, the sales outlook improved significantly.
Employment intentions remained essentially unchanged in August, increasing mostly in services and dropping in construction. The fear of unemployment of households, which has been fluctuating at a low level, eased in August and reached an unprecedented low point. Following a sector-wide drop in July, intentions to raise pricess howed mixed trends in August, continuing to decline in industry and services and reaching a 22-month low in the latter. However, they became noticeably stronger in construction and trade (although 75% of companies in the latter sector do not plan price changes for the time being). Inflationary expectations of consumers continued to ease slightly. The assessment of the situation of the Hungarian economy in the business sector remained unchanged. However, the opinion of households improved slightly after its deterioration in July.
The GKI consumer confidence index rose in August at a rate exceeding its rate of decline in the previous month. Households assessed their financial situation and especially savings capacity for the future much better than a month ago. The latter has not been higher since August 2002. Households considered the possibility of purchasing high-value durables more likely as well.
