GKI-Erste confidence index hits 18-month low

Economic think-tank GKI's combined monthly index of business and consumer confidence in Hungary prepared jointly with Erste Bank dropped for the fifth consecutive month in September, to its lowest level in 18 months, GKI reported at the weekend.

The index fell to -20.9 this month from -18.9 in August.

While the business confidence index registered only a minimal drop over one month, to -11.7 points from -11.3 points, consumer expectations fell sharply, to -47.2 points from -40.7 points.

The slight fall in the business confidence index was due to a further drop in the already low construction-sector index as industrial and trade expectations showed a modest improvement.

Industrial companies were less pessimistic than before, although they were more pessimistic in their assessment of the production outlook for the coming period.

In the construction sector, the assessment of both the output of the preceding three months and that of order stocks deteriorated.

Trade companies perceived improving sales positions and slightly declining inventories, but their expectations concerning orders continued to decline.

The index for services companies deteriorated as their assessment of future turnover significantly worsened although they termed current business as slightly better than previously.

The intention to raise prices was stable among industrial companies and rose slightly in the trade sector. In the construction sector, the number of companies planning to cut prices increased further. The share of trade companies planning price rises rose but the size of the planned rises lessened.

Households' inflationary expectations perceptibly increased.

The assessment of the outlook of the Hungarian economy deteriorated further in all sectors with the exception of the industry, and consumer sentiment became far more pessimistic.

The GKI consumer confidence index fell sharply further in September after declining almost steadily for nearly a year. People felt that both their own financial position and their ability to make savings were substantially worse than a month earlier, only their possibilities to purchase consumer durables improved slightly.