Economy 25 January 2021, 8:15am

Hungary economic sentiment best since coronavirus outbreak

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The economic sentiment index of think tank GKI rose considerably in January 2021. Although it reached its highest level since the start of the pandemic, it offset only just over half of its April fall. According to a survey conducted by GKI Economic Research Co. with EU support, both business and consumer expectations improved in the first month of the year, which led to a jump in the economic sentiment index to -16.3 points from -19.7.

In the business sector, all sectors except construction turned more upbeat in January 2021, but last March’s level was hit only by industry.

The industrial confidence index rose for the second month in a row in January. Industrial companies assessed the production of the preceding and the next periods, the stock of orders (including exports) and inventories better than previously.

Although expectations of construction companies worsened a bit at the beginning of the year, they are much more favourable than in the summer and early autumn. Expectations of structural engineering companies improved slightly in January, whereas those of civil engineering ones deteriorated. The assessment of production in the preceding quarter and that of orders deteriorated slightly.

The trade confidence index continued to rise, though much less than in December. The assessment of sales positions continues to fluctuate at a very low level. It declined in January, whereas the assessment of expected orders and inventories improved.

The services confidence index rose slightly in January, the general business climate and, in particular, the assessment of turnover in the past period improved, whereas sales expectations deteriorated slightly.

The willingness of the business sector to employ strengthened in January, mainly owing to industry. Here, for the first time since the beginning of the crisis, the number of companies planning to increase their staff significantly exceeded the number of those planning to reduce it. Employment intentions in trade and services changed minimally, whereas those in construction deteriorated. However, fear of unemployment of households has been rising for months.

Intentions to raise prices in construction, after a slow decline for several months, jumped in January, with more than a third of companies expecting to raise prices. The intention to increase prices also strengthened a lot in industry, while it remained unchanged in trade (although this sector had the highest proportion of those planning to raise prices), and it decreased in services. Inflationary expectations of consumers weakened markedly.

The assessment of the future of the Hungarian economy brightened significantly in all sectors, the least in trade and among households. GKI’s consumer confidence index approached its November level in January, following a significant decline in December. However, it is still noticeably below its peak in July following its fall in the spring.

Households assessed their financial situation as moderately improving compared to December. The assessment of their expected savings capacity improved significantly. Consumers also considered the possibility of purchasing high-value durables as more favourable than in the previous month.