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According to a survey conducted by GKI Economic Research Co. with the support of the EU, household expectations improved significantly in December, while the outlook for the business sector improved slightly compared to November, bringing GKI’s economic sentiment index to a nine-month high. Companies’ employment intentions improved only within the statistical margin of error, but their plans to raise prices strengthened compared to the previous month.

The GKI business confidence index rose by 1 point in December, within the statistical margin of error, after a 3-point rise in November. In the first month of winter, the outlook for the sector improved significantly in retail trade and construction and slightly in industry, while in business services the outlook was unchanged compared to November. In industry, the assessment of total order books improved, with in-house production stocks falling, but the production expectations for the next 3 months deteriorated on a monthly basis. In construction, the assessment of order books improved significantly, and employment expectations improved slightly. In trade, the level of stocks fell only slightly, but satisfaction with the previous 3 months’ business and the assessment of expected orders in the next 3 months improved markedly. In services, the assessment of the business performance of the previous three months changed in a favourable direction, but the turnover and employment expectations for the next 3 months worsened somewhat compared to November.

The GKI consumer confidence index rose markedly in December, after the uncertainty in November, reaching a 20-month high. Households rated their own financial situation in the last 12 months as improving compared to the previous month, while the financial outlook for the next 12 months barely changed. The perception of own money to spend on high-value consumer goods became more favourable than in November.

Businesses’ propensity to hire in December improved within the statistical margin of error compared to the previous month, with those planning to increase their workforce slightly outnumbering those planning to lay off. Optimists made up the majority in industry and business services, while in trade and construction these two ratios were essentially the same. The fear of unemployment of households remained unchanged compared to the last autumn month.

Overall price increase plans in the business sector rose markedly in the final month of the year and households’ inflation expectations eased compared to November. Businesses and households share similar views on the expected future situation of the Hungarian economy: both groups were much less pessimistic about the near future than they were in November.

Explanation to the methodology:

In line with the methodology used by the European Commission, GKI surveys the expectations of industry, trade, construction, services (the latter, as in the EU, excludes financial and public services) and households in the calculation of its business confidence index. GKI’s economic sentiment index is the weighted average of the consumer confidence index and the business confidence index.

The business confidence index is the weighted average of the industrial, trade, construction and services confidence indices. The industrial confidence index is derived from the responses to questions on business perceptions of incoming orders and inventories, and on production expectations. The construction confidence index is the average of the perception of incoming orders and employment expectations. The trade confidence index is the average of business and inventory level perceptions and turnover expectations. The services confidence index is the average of business activity assessment, expectations for turnover and employment. GKI publishes seasonally adjusted data by using appropriate mathematical method (the Tramo Seats method) to filter out the discrepancies caused by seasonal effects (e.g., differences in weather conditions between winter and summer, increased demand before Christmas, lower output because of summer vacations).

The consumer confidence index is compiled from responses to questions concerning the past and expected financial position of households, the expected economic situation of the country, and the prospects for purchasing consumer durables.

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Elemzés szerzői

  • Gábor Karsai Dr.

    Research area: In addition to macroeconomic and economic policy analyses, it also deals with domestic trade, examines the impact of trade policies and their impact on the economy.

  • Raymund Petz

    Research area: He deals with current trends in the construction industry and the real estate market, and is also active in business cycle research and mathematical-statistical modeling.