According to the May 2024 survey of Századvég Konjunktúrakutató, household economic sentiment improved by 1.9 index points, while business economic expectations deteriorated by 1.3 index points from the previous month. Thus, the household index, measured on a scale of -100 to +100, strengthened to -14.5, while the business index weakened to -13.5. The May survey shows that households’ perception of their own financial situation has improved significantly. Meanwhile, the largest positive change from April to May was measured in terms of the reduction in the price increases of businesses over the past year.

 

The prosperity index remained in negative territory, determined by the prolonged Russia-Ukraine war and the uncertainty caused by economic sanctions. Further significant improvement in economic expectations will be possible if the war ends, inflation remains in the central bank’s target range (between 2% and 4%), the interest rate environment becomes more favourable and energy markets see sustained low prices.

Two of the sub-indices of the household prosperity index weakened and two improved compared to the previous month. Employment continues to be the most positively assessed, improving from -1.8 in the previous month to 1.7, back in positive territory. Households’ inflation perceptions have become slightly less optimistic, as the indicator fell slightly from -68.7 in April to -71.9 in May. The perception of the economic environment weakened slightly from -24.3 in the previous month to -24.5, while that of the financial situation strengthened from -13.6 to -10.7.

In the household survey, the current financial situation of households showed a notable positive shift from April.

In response to the question “Which of the following is most relevant for your household?”, significantly fewer people (2.6% in May, down from 4.7% in April) said that they live in deprivation. Down from 10.1% in April, 8.2% of respondents said they live month to month. Meanwhile, the share of respondents who live problem-free increased by 4.9 percentage points, the share of respondents who can make ends meet increased by 3.8 percentage points, and the share of respondents who say they can just about make ends meet decreased by 3.2 percentage points. These categories were answered by 15.6%, 41.5% and 31.3% of respondents respectively.

In May, households sense of prosperity stagnated in one age group, while it improved in the other four. Among 18-29s, economic sentiment stagnated at -14.5 index points, while, on average, the most optimistic age group is still the over-60s (-11.6), followed by 18-29s (-14.5), while the most pessimistic age group is the 40-49s (-17.0), although their index value improved by 0.6 index points. The current index value was -16.8 for 30-39s and -14.9 for 50-59s.

For the business survey, two sub-indices improved, while two weakened. While the business environment index improved from -20.4 to -20.2, and the economic environment index from -24.5 to -21.0, the industrial environment index deteriorated from -2.1 to -4.4, and the production environment index from -8.2 to -11.5.

The biggest change for businesses in May 2024 was in recent price increases. When asked “How has your company been able to change the prices of its products in the past year?”, overall, business leaders reported significantly smaller price increases overall in May. Compared to the April results, 4.5 percentage points more (21.7%) said they had increased their prices by less than 1%. In addition, 1.2 percentage points more (7.4%) have increased their prices by 1-2%. In addition, 0.3 percentage points more (7.6%) reported an increase of between 2% and 4%, and 0.6 percentage points more (12.1%) reported an increase of between 4% and 5%. In addition, 2 percentage points less (5.9%) of the respondents increased their prices by between 5% and 6%, 0.3 percentage points less (3.5%) by between 6% and 7%, and 4.3 percentage points less (31.9%) by more than 7%.

Looking at the sectoral breakdown of companies, the sense of prosperity increased for two sectors and decreased for three sectors on average. While the average sense of prosperity rose by 0.9 index points in trade and by 0.4 index points in construction, businesses’ economic expectations fell, on average, by 1.9 index points in services, by 4.1 index points in agriculture and by 2.1 index points in industry from April to May. In May, the strongest sense of prosperity was measured in industry (-8.3) and the weakest in agriculture (-13.2).

• About the prosperity index

The purpose of the prosperity survey conducted by Századvég Konjunktúrakutató is to provide information to decision-makers and analysts on current and near-term economic developments. Since August 2019, our Institute has been producing the business and consumer prosperity index on a monthly basis. Our monthly survey asks 1,000 business leaders and 1,000 adult residents about their assessment of the economic situation and their expectations. For the two groups, we ask 29 and 28 questions respectively, covering a wide range of economic life. Among the responses received, positive ones (e.g. expected economic improvement) are given a positive score, while negative ones (expected decrease in employment) are given a negative score. The scores are then averaged and converted to a scale between -100 and +100 to obtain the prosperity indices. Thus, the higher the value of the prosperity indices, the more positive households’ and companies’ perception of the economy is. In addition, for both the household and the business survey, 4 sub-indices are constructed using a subset of the questions to illustrate the evolution of economic sentiment in a particular area.