The prosperity index remained in negative territory, determined by the uncertainty caused by the prolonged Russia-Ukraine war and the economic sanctions. Significant improvement in economic expectations is likely to occur 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.
Three of the sub-indices of the household prosperity index weakened and one strengthened compared to the previous month. Employment continued to be the most positively assessed, with a deterioration from -2.9 in the previous month to -4.6. The perception of the economic environment deteriorated in October from -28.3 points in the previous month to -29.1, while that of the financial situation went from -11.3 to -14.2. At the same time, households’ inflation perceptions have become slightly more optimistic, as the indicator improved slightly from -67.3 in September to -66.8.
Compared to September, the biggest positive shift in the survey of households’ sense of prosperity was that households expected Hungary’s economic situation to improve over the next year.
In fact, when asked “How do you see the country’s economic situation changing in the next year?”, the October survey responses painted a more positive picture of the economic situation. 23.2% of residents surveyed (down 2.4 percentage points from September) believe that the economic situation will worsen significantly in the next year. In October, 2.1 percentage points more people (22.0%) predicted a slight deterioration. 23.3% of respondents (1.5 percentage points less) predict an unchanged economic situation. A slight improvement is expected by 21.9% of the representative population (1.7 percentage points more), while 4.5% of the population expect a significant improvement, a decrease of 0.4 percentage points.
Looking at households’ sense of prosperity by educational level, economic sentiment improved only among those with vocational qualifications or who are skilled workers, where the prosperity index improved by 2.9 index points. At the same time, those with no more than primary education, those with secondary education and those with a college or university degree showed a more negative sense of prosperity (-3.5, -2.8 and -2.9 index points respectively). Thus, regarding current economic sentiment, the index value of -15.4 for those with tertiary education is the most optimistic value, followed by -18.0 for those with a vocational qualification or a trade, -18.7 for those with secondary education, then -21.9 for those with primary education or less.
The business survey showed an improvement in all sub-indices.
The production environment sub-index strengthened from -10.6 to -9.7 index points in September. The industry environment index improved from -7.6 to -6.1, the business environment index from -25.2 to -24.6 and the economic environment index from -31.2 to -30.9.
The biggest change for companies in October 2024 was the change in the prices of their products over the past year.
When asked “How has your company been able to change the prices of its products in the past year?”, business leaders reported an overall increase in pricing power in October compared to September. 4.1 percentage points less, 18.0%, reported a price increase of less than 1%. 7.7%, or 0.9 percentage points more, mentioned an increase between 1% and 2%, while 8.0%, or 1.4 percentage points less, mentioned the Hungarian central bank’s tolerance band (an increase between 2% and 4%). 11.0% (0.2 percentage points less) mentioned an increase between 4% and 5%, 8.3% (2.5 percentage points more) mentioned an increase between 5% and 6%, 3.1% (1.2 percentage points less) mentioned an increase between 6% and 7%, and 30.6% (1.1 percentage points more) mentioned an increase more than 7%.
Looking at the sectoral breakdown of companies, the sense of prosperity increased for four sectors and decreased for one sector on average. While the average sense of prosperity increased by 2.7 index points to -10.5 index points in industry, by 3.5 percentage points to -15.6 index points in construction, by 0.6 index points to 15.7 index points in services and by 0.2 index points to -16.1 index points in trade, economic expectations of companies decreased by 3.2 index points in agriculture in October. This month, the strongest sense of prosperity was recorded in industry (-10.5) and the weakest in trade (-16.1).
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.
