Hungary: Economic sentiment declines in May as consumer confidence wanes
May 28, 2018
The GKI economic sentiment index, a composite indicator, decreased to 8.3 points in May from 8.8 points in April, reflecting a drop in consumer confidence. Nonetheless, the indicator remained near the historic peak hit in February.
The business sentiment component of the index improved in May, inching up to 13.8 from 13.3 points in April, amid soaring confidence in the industrial and construction sectors, whose indices both hit new historic records in May. Meanwhile, sentiment among trade and services firms deteriorated.
Looking at the different subcomponents of the business sentiment survey, intentions to hire grew in the industrial and construction sectors, whereas they fell considerably in trade and modestly in services. Intentions to raise prices strengthened in industry and services. The percentage of firms that intended to raise prices fell, however, in the construction sector, with more than three quarters of companies not planning to change prices. Meanwhile intentions to increase prices in the construction sector remained unchanged. Finally, perspectives on Hungary’s economic outlook were mixed, with confidence notably growing in industry and slightly in construction, but worsening in the trade and services sectors.
In contrast, consumer confidence deteriorated in May, with the index falling to minus 7.5 from an over 15-year high of minus 3.9 in April. The decline came as households were less optimistic about their current financial situations and were consequently more pessimistic about the possibility of purchasing big-ticket items. Households were also less confident in their ability to save in the future. Furthermore, consumers were more downbeat about the labor market, expressing greater fear of unemployment.
Hungary Fixed Investment Forecast
FocusEconomics panelists expect fixed investment to expand 10.0% in 2018, which is up 0.5 percentage points from last month’s projection. For 2019, the panel expects fixed investment to grow 4.9%. Panelists see private consumption expanding 4.3% in 2018, which is up 0.3 percentage points from last month’s forecast. For 2019, the panel sees private consumption growing 3.6%.
Author: Lindsey Ice, Economist