Economy 24 October 2022, 9:10am

Hungarian confidence indices plummet

Portfolio

The economic sentiment index of Hungarian think tank GKI fell again sharply in October, marking the sixth consecutive month of decline. While in the previous months the fall in the consumer sub-index was the main reason for the decline in the headline index, in October it was the sharp drop in business expectations across all sectors.

According to a survey conducted by GKI Gazdaságkutató (GKI Economic Research Co.), business expectations were similarly negative in the Covid surge at the beginning of 2021. And consumers are now more pessimistic than they were in the spring of 2020, during the initial coronavirus panic, with the index close to its lowest level since 2010. For manufacturing and service companies, the role of demand shortages in hampering growth is already slightly greater tan that of labour shortages.

In October, all branches of the business sector became significantly more pessimistic, with more firms in the industry now expecting deterioration than improvement.

The industrial confidence index fell back in October to its March 2021 level. Compared to September, the perception of order books, including exports, deteriorated and the perception of inventories stagnated.
The construction confidence index deteriorated for the third month, falling to a two-year low in October. The outlook for building construction was significantly worse than in September, while that for civil engineering improved slightly. Satisfaction with production in the previous three months and the assessment of order books also deteriorated.
In October, expectations worsened most in trade, which is now the most pessimistic sector. The assessment of the sales position and the expected development of orders both deteriorated significantly, and the assessment of inventories also worsened slightly.
Among service enterprises, the overall business climate and turnover expectations have weakened. The perception of turnover and quantity in the previous period also deteriorated.

In October, the business sector's propensity to employ continued to shrink, after a year and a half, there were again more firms planning to reduce their headcount than to expand. The exception is industry, where the share of firms planning to recruit even increased slightly. Public fear of unemployment has continued to grow. After a lull in September, intentions to raise prices are on the rise again in all sectors except construction, with almost 70% of firms in industry and trade planning price hikes. Consumers' inflation expectations have also increased further. After a modest, temporary improvement in September, the business community's assessment of the future state of the Hungarian economy has deteriorated dramatically, with pessimism approaching the panic levels of the start of the Covid crisis. Consumers are even more pessimistic.

The GKI consumer confidence index had not been this low since October 2012. The perception of the public of their own financial situation have continued to turn increasingly negative. After five months of decline, it is now worse than at the start of the Covid crisis. People's perceptions of their own ability to save for the future have been weakening at a broadly steady monthly pace since the all-time record high in February. The public's perception of the conditions for buying high-value consumer durables in the present was significantly worse than in September, and slightly worse for the next year.

Cover photo: Getty Images