GKI says that improvement was registered not only in business expectations but also in the consumer confidence index, which had been fluctuating in recent months, and has now reached its highest peak for more than a year.

The combined gauge of consumer and business confidence rose to 4.0 points in August from 0.6.  The business confidence index rose to 7.5 points in August from 4.3 in July. The consumer confidence index rose to -5.9 points in August from -10.1 last month.

In the business sector, primarily the industrial confidence index, and to a lesser extent the service provider confidence index increased. Although the six-month decline of optimism in construction continued, it is still by far the most upbeat sector. The trade confidence index fell to a three-year low. After a two-month decline, the industrial confidence index rose markedly in August.

The assessment of the production level, stock of orders (including export orders) and stocks of the past quarter improved significantly. However, production expectations worsened. In August, the construction confidence index fell to what is almost its lowest point in the past two years. The prospects of companies in structural and civil engineering also declined. The assessment of production in the previous quarter hardly changed, whereas that of orders dropped markedly.

Following a drop in July, the trade confidence index continued to fall, and it is in the lower zone of the relatively narrow band in which it has fluctuated for the past five years.

The assessment of sales positions and stock levels became significantly worse, and after a sharp decline in the previous month, expectations concerning new orders declined slightly. The services confidence index, however, rose back to its April level. Although the evaluation of the general business climate did not change much, the sales outlook improved significantly.

Employment Trends

Employment intentions remained essentially unchanged in August; they strengthened in services and weakened in construction. The fear of unemployment in households was fluctuating at a low level, and eased in August, reaching an unprecedented low point.

Following a sector-wide drop in July, the intention to raise prices showed mixed trends in August; it continued to decline in industry and services, reaching a 22-month low in the latter. However, it became noticeably stronger in construction and trade (although three quarters of companies in the latter sector do not plan price changes for the time being).

Inflationary expectations of consumers continued to ease slightly. The assessment of the situation of the Hungarian economy in the business sector remained unchanged. However, the opinion of households improved slightly after its deterioration in July.

The GKI consumer confidence index rose in August at a rate exceeding its rate of decline in the previous month. Households assessed their financial situation and especially savings capacity for the future much better than a month ago.

The latter has not been  so favorable since August 2002. Households considered the possibility of purchasing high-value durables more likely as well.