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GKI economic sentiment index plummets by unprecedented extent

The Economic Sentiment Index of economic research institute GKI fell by almost 30 points, with both business and consumer confidence dropping sharply, due to the effects of the coronavirus pandemic.

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The business confidence index declined by about 25 points and the consumer one by nearly 40 points compared to March.

GKI notes that the drop is even more significant than the decrease observed in H1 2009, during the global economic crisis.

In the business sphere, expectations in all sectors have deteriorated drastically, most in services (by approximately 35 points) and least in industry (by about 20 points).

In industry, only the evaluation of stock levels improved slightly. The share of companies expecting an expansion of production decreased from 21% last month to 5%. At the same time, those expecting a decline in product increased from 18% to 65%. The industrial confidence index now stands at an 11-year low.

Pessimism intensifies

The construction confidence index is currently at a seven-year low. GKI says that the expectations of civil engineering companies collapsed, and those of structural engineering firms also became more pessimistic. The assessment of production in the previous quarter and that of orders also deteriorated sharply.

The trade confidence index is at its lowest point since early 2009. The assessment of sales positions, incoming orders, and stock levels have all deteriorated.

While pessimism about sales positions is still far from its historic low of March 2009, companies have never seen incoming orders so negatively, GKI says.

The service sector, which was the most optimistic in March, became the most pessimistic one by April, with its confidence index approaching spring 2009 levels. Sales expectations worsened the most.

Intentions to employ, while still better than in 2009, have fallen far into the negative range for the first time in more than six years, meaning that the share of companies planning layoffs has exceeded that of those planning recruitment. 

GKIʼs report says that the assessment of the Hungarian economy’s prospects fell to a much greater extent than the assessment of employment, approaching the level typical of the most pessimistic months of 2009.

The pessimism of households intensified to the greatest extent in connection with the expected unemployment, and the assessment of the future of the Hungarian economy also worsened dramatically.

Intentions to raise prices have decreased in all sectors, with the exception of trade, where they remained unchanged, though the share of firms expecting price increases or price reductions went up  significantly as well.

Inflationary expectations by consumers have jumped.

Households’ assessment of their own expected financial situation has become significantly more unfavorable, the report says.