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Business, consumer confidence deteriorate

Economic think-tank GKI's combined monthly gauge of business and consumer confidence prepared jointly with Erste Bank fell again in May as an April improvement proved only temporary.

The index, prepared with European Union support, dropped to -13.2 points in May, its lowest level so far this year, primarily due to the spectacular 9-point fall in industrial expectations. from -9.1 points in April. The consumer confidence deteriorated less.

The business confidence index declined to -4.3 points in May from +0.6 points in April.

GKI said the considerable fall in industrial expectations, which followed an almost uninterrupted rise of 24 months, was an unexpected development.

Industrial companies were more pessimistic than a month earlier with regard to the output of both the past and the upcoming period, and the assessment of the stock of orders - including export orders - also deteriorated. Inventories were seen as bigger than earlier by interviewees.

The construction industry remains the most pessimistic sector. Expectations continued to decline in May. Although the assessment of the output of the previous months and the stock of orders improved slightly, employment plans deteriorated significantly.

The measure of sentiment among trade companies inched up slightly in May and so did the index of service companies.

Businesses' intention to hire more people weakened in the industrial and construction sectors, improved for trade companies and was unchanged in services.

Plans to raise prices dropped in every sector.

The assessment of the outlook of the Hungarian economy deteriorated significantly in almost all sectors as well as among consumers for the third month in a row.

The consumer confidence index has been falling almost without interruption this year, declining 1.7 points to -38.5 points in May. Consumers were more pessimistic in May as regards their own financial position than a month earlier and thought that the time was even less right than earlier for buying consumer durables, but were slightly more optimistic regarding their capacity to make savings in the coming twelve months. People are more fearful of unemployment than earlier, but their inflationary expectations lessened.