According to the empirical survey conducted by GKI Economics Research Co. with the support of the EU, the overall expectations of the business sector remained unchanged in October compared to the previous month, but consumers became slightly more pessimistic. GKI’s economic sentiment index fell for the fourth month in a row, dropping by small steps to an eight-month low in October. Companies’ employment plans did not change significantly, but the predictability of the business environment improved considerably compared to September. Business plans to raise prices rose modestly, while the inflationary expectations of households remained unchanged.

GKI’s business confidence index remained unchanged in October compared to September. However, within the overall picture showing stagnation, differences could be detected between developments in sectoral expectations. In the second month of autumn, month-on-month expectations improved in industry and especially in construction, while business services became slightly more pessimistic and trading companies more markedly so. Thus, by October, trade became the most pessimistic sector.

The overall propensity to hire of businesses in the second month of autumn did not significantly change compared to September, although it strengthened in industry and weakened in services. The perception of the predictability of the business environment improved substantially. Plans to raise prices increased only modestly, mostly in business services. The most important obstacle to the future expansion of production and services was the lack of demand (perceived by 55 per cent of companies). One in four companies faced labour shortages and one in five had financial and funding problems. Lack of raw materials and capacity was a problem for only 6 per cent of respondents.

The GKI consumer confidence index hardly changed in the March-September period, after a significant spike in January-February. With a 2-point drop in October compared to the previous month, this indicator reached an eight-month low. Compared to the previous month, households rated both their financial situation in the past 12 months and their outlook for the next 12 months as worsening compared to September, and Hungary’s economic situation in the next 12 months was also considered deteriorating. The perception of own money to spend on high-value consumer goods hardly changed. Households’ inflationary expectations and the outlook for unemployment did not change significantly compared to the previous month.

Explanation to the methodology:

In line with the methodology used by the European Commission, GKI surveys the expectations of industry, trade, construction, service sector and households (consumers) 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 confidence, turnover and employment expectations.

The consumer confidence index is the arithmetic average of balance indicators calculated from responses to questions on households’ perceptions of their financial situation in the past 12 months, their financial prospects for the next 12 months, the expected development of Hungary’s economic situation and their prospects for buying consumer durables.

GKI publishes seasonally adjusted data by using appropriate mathematical 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).