Economy 28 May 2024, 8:31am

Economic expectations stuck in Hungary - GKI

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In May, the outlook for the business sector and the population did not change significantly compared to April, according to the Economic Research Institute's (GKI) business survey. Sentiment among firms and households also deteriorated within the margin of error, resulting in a minimal fall in the overall business climate index. Firms' employment intentions improved very slightly, while their price increase plans declined markedly. The predictability of the business environment deteriorated somewhat compared to the previous month.

The GKI Business Climate Index, a composite indicator of business and household sentiment, fell by a narrow 1 point in May compared with the previous month, within the margin of error. The GKI Business Confidence Index, a single indicator of business confidence that summarises the outlook for the business sector, has fluctuated in an extremely narrow range since July last year. The index did not break out of this band in May, falling by 1 point, within the margin of error, compared to the previous month.

In the current month, only construction firms showed a markedly positive change (up by 3 points), while the picture remained unchanged in trade and expectations worsened slightly in industry and business services (down by 1-2 points).

In industry, only the perception of stocks of own-produced inventories was more favourable than in April. The overall assessment of order books worsened slightly, while the production outlook for the next three months deteriorated substantially.
In construction, the assessment of order books and employment expectations have both improved markedly.
In the distributive trades, satisfaction with the previous three months' business declined slightly, while the assessment of the level of stocks remained unchanged and the assessment of expected orders in the next three months improved.
In the services sector, business sentiment deteriorated slightly in the previous three months, while turnover expectations and employment plans for the next three months were little changed.

Firms' propensity to hire improved only very slightly in May, with roughly the same proportion planning to increase and decrease their workforce. Only among service firms is there a clear majority of optimists. Overall price increase plans in the business sector fell sharply in May to a six-month low. The predictability of the business environment deteriorated slightly.

The GKI Consumer Confidence Index, after a significant swing in January-February, "calmed down", and in May it was only within the margin of error compared to the previous month. Respondents assessed their own financial situation for the next 12 months and the country's economic outlook as slightly improving, while their own financial situation over the past 12 months was unchanged from the previous month. However, the perception of own money to spend on high value consumer goods deteriorated slightly. Compared to April, people's inflation expectations rose slightly and fears of unemployment also increased.

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