According to the survey of Századvég Konjunktúrakutató in February 2022, the sense of prosperity of households and businesses became more favourable. On a scale between -100 and +100, the value of prosperity index grew from -2.2 to -1.9 regarding households, while it grew from -0.1 to +0.5 regarding businesses. The value of the corporate index has become positive for the first time since February 2020, thus returning to the pre-crisis level. The value of the household index has reached a substantially higher level than the typical level since the emergence of the coronavirus, but it is still slightly lower than before the crisis. To return to previous favourable levels, inflation and inflation expectations need to be brought down.
Corporate prosperity index has turned positive after two years
One sub-index of the four sub-indices of the household prosperity index slightly increased, two of them decreased, and one of them increased in February. The slight increase was characteristic of the financial situation, its index was -0.1 compared to the previous month’s -0.3. The perception of employment significantly improved, from 8.8 to 10.4, i.e., respondents still view the state of the labour market rather positively. The perception of economic environment slightly deteriorated, from -2.1 to -2.6, while the value of the inflation index decreased from -61.1 to -63.1, which is the lowest value since the beginning of August 2019, in line with rising inflation figures.
In February, 36.0 percent of those surveyed said that they planned to spend more in the following 12 months (e.g., buying a home or renovating it, buying a car, etc.). This is an obvious improvement after 31.7 percent in January and the highest value since the start of the time series in August 2019. The increase in wages and the February transfers decided by the government, primarily the PIT refund, may have played a role in the growth.
At the same time, the perception of inflation deteriorated further in the second month of the year. When asked by what percentage consumer prices rose in the last 12 months, already 55.9 percent of respondents indicated inflation above 7 percent, compared to last month’s 50.9 percent. For almost all other categories, the number of those who indicated the above decreased: the proportion of those experiencing inflation between 6 and 7 percent fell from 8.8 percent to 7.6 percent, and that of those experiencing inflation between 5 and 6 percent fell from 13.5 percent to 13.1 percent. The proportion of those experiencing inflation between 4 and 5 percent fell from 12.1 percent to 11.8 percent, while the largest decrease appeared in the case of those who perceived inflation in line with the central bank’s target band (3.9 percent compared to 7.3 percent). The proportion of those experiencing inflation between 1 and 2 percent decreased from 3.5 percent to 1.8 percent, and that of those who perceived a lower inflation hardly changed: it was 0.8 percent.
According to the results of the corporate survey, three of the four sub-indices showed an increase and one a decrease in February. The surveyed company executives rated the sectoral environment as the most favourable, with its index value rising from 15.4 to 16.2. The perception of the economic environment also improved from -2.2 to -1.9, and the perception of the production environment improved from -2.5 to -1.4. There was a deterioration in the perception of the business environment, where the index value decreased from the previous month’s 2.6 to 1.2. However, it is important to highlight that despite the downturn, positive opinions still formed a majority.
In February, company executives were more positive about the current level of their order book than in the previous month. After 10.3 percent in January, 15.0 percent reported a high order book, while the proportion of those with an average order book fell from 59.6 percent to 55.0 percent. Low order book was reported by 26.8 percent compared to the previous month’s 25.6 percent.
The accelerating increase in prices, which is also reflected in inflation data, can be seen not only in the household survey but also in the corporate survey. In February, 30.4 percent of respondents said they raised their prices by more than 7 percent, the share of which was only 25.4 percent in the previous month. The proportion of those who had not been able to raise their prices in the previous 12 months was also relatively high, 20.6 percent. One to two percent price increases were reported by 8.5 percent, 2 to 4 percent price increases by 9.1 percent, 4 to 5 percent price increases by 10.0 percent, 5 to 6 percent price increases by 5.6 percent, and 6 to 7 percent price increases by 4.6 percent. The share of those with price increases above 7 percent was the highest in industry (41.0 percent) and trade (41.8 percent), while it was the lowest in the service sector (23.8 percent).
About the prosperity index
The task of the prosperity research conducted by the Századvég Konjunktúrakutató Zrt. is to provide decision makers and analysts with information about the current and expected processes of the economy in the near future. Our institute has been compiling corporate and household prosperity indices on a monthly basis since August 2019. In our monthly survey, we ask 1,000 company executives and 1,000 adult residents about their assessment of the economic situation and their expectations thereof. Regarding the two groups, we ask 29 and 28 questions, respectively, which cover a wide range of economic life. Of the responses, positive ones (e.g., expected improvement in the economic situation) receive positive scores, while negative ones (expected decline in employment) receive negative scores. Then, by averaging the scores and converting them to a scale between -100 and +100, the prosperity indices are obtained. Thus, the higher the value of the prosperity indices, the more favourable the processes in the economy are for households and companies. In addition, regarding both household and corporate surveys, we also prepare 4 sub-indices for each by using some of the questions, which illustrate the development of economic well-being in an area.