Intensified insecurities caused by the war has a greater impact on the sense of prosperity of households than of companies


Intensified insecurities caused by the war has a greater impact on the sense of prosperity of households than of companies

According to the survey conducted by Századvég Konjunktúrakutató in May 2022, the sense of prosperity of both households and businesses became moderate: on a scale between -100 and +100, the value of prosperity index decreased from -7.5 to -13.3 regarding households, while it decreased from -6.8 to -8.7 regarding businesses. The decline in the indicators is still explained by the Russian-Ukrainian war, but the sanctions already imposed and the floating of the sanctions regarding the ban on energy imports also play a significant role. An improvement in the sense of prosperity is expected when the war and the floating of sanctions jeopardising the functioning of the Hungarian economy end.

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Compared to last month, all four sub-indices of the household prosperity index have deteriorated. There has been no significant difference in the extent of the deterioration between the individual indices. The most favourable is still the perception of employment, with its sub-index changing from +9.7 to +4,6. Households’ perception of inflation is the most negative, with its sub-index falling from -76.3 to -81.2. The perception of economic environment has changed from the last month’s value of -12.3 points to -19.9, while that of the financial situation from -5.9 to -11.2.

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The population has become more pessimistic about the next 12 month’s economic situation. The proportion of those expecting a significant deterioration has risen from last month’s 27.0 percent to 29.7 percent, while that of those expecting a moderate deterioration has risen from 18.3 percent to 23.9 percent. The proportion of those expecting an unchanged economic situation is 14.8 percent compared to last month’s 13.2 percent, while that of those expecting a slight improvement is 16.2 percent (it was 18.4 percent in April), and the proportion of those expecting a significant improvement is 5.2 percent (it was 10.1 percent last month).

There has also been a deterioration in the households’ perception of their own financial situation over the past 12 months, presumably due to a deteriorating perception of rising inflation. While in April 10.1 percent said their financial situation had significantly deteriorated and 21.5 percent said it had slightly deteriorated, these two rates changed to 14.9 percent and 24.8 percent in May, respectively. As in the previous month, 41.7 percent has experienced an unchanged financial situation. The proportion of those who have experienced a slightly improving financial situation is 14.5 percent compared to 20.6 percent in April, while that of those who have experienced a significantly improving financial situation is 3.3 percent compared to 4.4 percent.

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Regarding the corporate survey, the values of all four sub-indices have become more unfavourable compared to last month. The index of the economic environment has changed from last month’s -20.2 to -22.0, the index of the sectoral environment has changed from +0.4 to -4.3, the index of the production environment from -3.0 to -4.5, while the index of the business environment has changed from -8.9 to -12.1.

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While households have become rather pessimistic about future economic processes, in the case of businesses the perception of the past has deteriorated, in which the rise in energy and commodity prices also at international level and inflation may have played a significant role. The proportion of those who have experienced a significant deterioration in the economic situation in the past 12 months is 27.0 percent compared to 25.5 percent in April, and that of those who have experienced a slight deterioration is 33.2 percent compared to 28.2 percent. Compared to 15.9 percent in April, the proportion of those who think the economic situation has been unchanged is 13.5 percent, while that of those who have experienced a slight improvement fell from 19.8 percent to 17.1 percent, and the proportion of those who have perceived a significant improvement fell from 8.1 percent to 7.0 percent.

However, there has been an improvement in the innovation plans of businesses. The proportion of those who will definitely not innovate in the next 12 months has dropped from 44.9 percent to 39.4 percent. The proportion of respondents choosing the option of ‘probably not’ has hardly changed, it is 22.0 percent, while that of those choosing the option of ‘rather not’ is 12.2 percent compared to last month’s 8.6 percent. The proportion of businesses choosing the option of ‘rather innovate’ is 7.8 percent (it was 8.4 percent in April), that of those choosing the option of ‘probably innovate’ is 11.7 percent (it was 8.7 percent in April), while the proportion of those choosing the option of ‘definitely innovate’ is 5.5 percent (it was 7.3 percent in April).

 

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 perception 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. 

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