Construction expectations up, consumer confidence down


The economic sentiment index in Hungary deteriorated "marginally" in May, according to economic research institute GKI. This was the result of a deterioration in consumer expectations. Business expectations improved slightly, GKI says.

GKIʼs combined gauge of consumer and business confidence inched down to 8.3 points in May, from 8.8 points in the previous month. The standalone business confidence index edged up to 13.8 points, from 13.3 points previously.

The economic sentiment index is only slightly below its historic peak reached in February, GKI notes. In the business sector, the industrial and construction confidence indices rose to a new peak in May. The optimism of service companies fell from its historic peak in April to its level a year ago, while expectations of trading firms continued to worsen for the third month running.

After a two-month decline, the industrial confidence index grew again and even exceeded its February record. The assessment of production in the preceding and the next period, as well as that of the stock of orders (including exports) and inventories, improved as well.

The construction confidence index rose significantly in May, reaching a new historic peak. This is due to the improved prospects of structural engineering companies as expectations of civil engineering companies remained essentially unchanged. The assessment of production in the preceding quarter, as well as that of orders, became noticeably more favorable.

Although the trade confidence index fell for the third consecutive month, it remained in the relatively narrow band characterizing the last four years. The assessment of sales positions and the stock of orders became worse, whereas that of inventories picked up. In the fall of the service confidence index in May, the deteriorating assessment of turnover in the past and next periods played an important part.

Intentions regarding employment grew in industry and construction. However, they declined considerably in trade and slightly in services. Fear of unemployment among households intensified. 

Intentions to raise prices were somewhat stronger in industry and services, whereas they remained unchanged in construction. In trade, the proportion of those planning price rises continued to fall, and more than three-quarters of companies in this sector did not plan to change prices. The inflationary expectations of households intensified steadily.

The assessment of the prospects of the Hungarian economy improved significantly in industry and slightly in construction, while deteriorating considerably in trade and among consumers, and slightly in services.

The GKI consumer confidence index declined, following a three-month period of improvement and having reached a historic peak in April, falling from -3.9 points to -7.5 points. Households assessed their financial situation and savings capacity for the future as deteriorating, although they remained optimistic. Households were also more pessimistic regarding the possibility of purchasing high-value durables.

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