Economy 22 January 2024, 9:35am

2024 brought a burst of public optimism in Hungary

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Household expectations improved spectacularly in the first month of the year, while the outlook for the business sector deteriorated marginally compared to December, according to the Economic Sentiment Survey of the Hungarian Economic Research Institute (GKI), whose composite index reached an 18-month high.

The GKI economic sentiment index rose by a solid 2 points in January compared with December. The last time this index was this high was in July 2022, the last month before the energy crisis. Business sentiment did not improve at all in January, with the GKI business confidence index falling by 1 point, within the margin of error. In the first month of this year, only industry showed a noticeable negative change (2 point drop), while the outlook for firms in the other three sectors was virtually unchanged compared to December.

In industry, the assessment of total order books was little changed, the level of own-account inventories rose slightly and the production outlook for the next three months deteriorated.
In construction, the assessment of order books has improved significantly, but employment expectations have become more cautious.
In trade, satisfaction with business performance in the previous three months increased, but inventories were higher and the outlook for orders in the next three months deteriorated.
In the services sector, business sentiment in the previous three months was positive, but turnover expectations for the next three months worsened compared with December, while employment plans remained unchanged.

The GKI consumer confidence index rose to a near two-year high in January. Residents rated both their financial situation over the past 12 months and their financial outlook for the next 12 months as strongly improving.

Businesses' propensity to hire worsened only within the margin of error in January, with no significant difference between the proportion planning to increase and decrease their workforce. Optimists are in the majority in trade and business services, while pessimists are in the majority in industry and construction.

Overall price increases in the business sector rose slightly further in the first month of this year, after a sharp pick-up in December, but fell slightly in the retail sector. The predictability of the business environment improved slightly, bringing this indicator to a six-month high. After December, expectations about the outlook for the Hungarian economy improved strongly in January, reaching a near two-year high, but pessimists still outnumber optimists by a large margin.

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