Improving business, deteriorating consumer expectations

The last time when business expectations were as favourable as now had been ten years ago, at the beginning of 2001. Consumers are also quite optimistic but their expectations have been deteriorating for four months. The GKI-Erste economic sentiment index adjusted for seasonal effects kept on moving upwards.

The last time when business expectations were as favourable as now had been ten years ago, at the beginning of 2001. Consumers are also quite optimistic but their expectations have been deteriorating for four months. The GKI-Erste economic sentiment index adjusted for seasonal effects kept on moving upwards.

In February, expectations became more upbeat in all sectors of the business sphere except for trade. Pessimism following the crisis first declined markedly in industry  in spring 2009 and expectations of this sector have been improving – even if more slowly -ever since. Expectations on production and stock of orders – especially those of exports -improved in February. However, the assessment of past production and stocks of own production dropped slightly. In construction the confidence index increased significantly after a nearly six-month fluctuation near to stagnation. The assessment over the production and stock of orders of the past three months improved markedly. In trade the confidence index has been increasing for many months but in February it improved less than the month before. The assessment of orders picked up but that of sales positions and stocks turned worse. In services expectations turned better notably. The assessment of turnover in the past and in the future three months and that of the state of the business improved.

Intentions to employbecame better in all sectors except for industry, especially in construction and fear from unemployment dropped among households, too. Intentions to increase prices increased in all sectors more or less, just as consumers’ inflationary expectations. In industry both the extent and the scope of the price rise increased, whereas in construction the gap between these two ratios decreased further, although those anticipating decreasing productions prices still outnumbered those expecting increasing ones. In trade the ratio of those firms that plan price rises remained unchanged, however, the size of the envisaged average price increase was slightly higher. The assessment of the prospects of the Hungarian economy improved in all sectors, especially in construction but they turned worse notably among households.

GKI’sconsumer confidence index has been decreasing slightly since its peak of October 2010. In February, the assessment of consumers’ own financial position deteriorated significantly but the prospects of their saving capacity for the next 12 months improved slightly compared with January.

GKI-Erste economic sentiment index and its elements, 1996-2011