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Business confidence improves in July

Improving confidence indices since Q2 indicate that the economic crisis is subsiding, though specialists say the crisis in Hungary's real economy will culminate only in the middle of 2010, according to Ecostat's July forecast published on Monday.

Ecostat's TOP-100 index of confidence at Hungary's biggest hundred companies rose 2 percentage points to 57.8% in July.

Ecostat's SME confidence index climbed 3 percentage points to 65.1%.

Ecostat's consumer confidence index dropped 2.9 percentage points to 82.6% in July, after individual confidence indices rising 8-12 percentage points in the previous two months.

Ecostat attributed the improvement in business confidence to global and domestic crisis-management measures that have been taken over recent months.

A total of 53% of major companies reported that their output had decreased over the past three months, while 17% said that production and increased over that period.

A total of 42% of major companies said that they planned to decrease production over the coming three months, while 20% said that they planned to increase production over that period.

A total of 34% of companies expect domestic demand to decrease, while 19% of companies expect domestic demand to increase and 50% expect domestic demand to stagnate, largely unchanged from Ecostat's previous poll.

The 100 largest companies in Hungary reported that the business climate had deteriorated in the country during the month of July, attributing this decline to stricter credit conditions and circular debt.

Of Hungary's largest companies, 13% said they planned to hire more workers and another 13% said they planned to dismiss a substantial number of workers, while one-third of the companies said they planned to lay off a small number of workers.

Most Hungarian businesses consider weak domestic demand, an unsure macro-environment and high taxes as the major obstacles in their development.

Ecostat's sector-based confidence index was 33.6%, up 1.5% from July.

Output in the processing industry fell 22.1% yr/yr in May, while export fell 24.8%. Domestic sales fell 18.5%.

Output in the construction industry fell 10% in May, while the stock of contracts improved. The construction industry is not undergoing steady improvement, while smaller state subsidies are unable to compensate for declining investments from the private sector.

The optimism of service-sector companies was unchanged in July at 32.8%.

Households were more optimistic about prices and rated their current financial situation similar to that in June. About 47% of Hungarians expect the economy to worsen, while 43% say the economy will stop deteriorating and possibly improve.

A total of 45% of households said their own finances will worsen over the next 12 months, while 16% said their conditions will improve over the same period.

A total of 63% of households expect unemployment to increase. (MTI-ECONEWS)