Wartime inflation continues to have a negative effect on the sense of prosperity


Wartime inflation continues to have a negative effect on the sense of prosperity

According to the August 2022 survey of Századvég Konjunktúrakutató, the sense of prosperity of both the population and businesses has declined: on a scale between -100 and +100, the value of prosperity index decreased from -16.8 to -26,6 regarding households, while it decreased from -19.0 to -23,4 regarding businesses. The decline in the indicators is still caused by the higher inflation environment induced by the Russian-Ukrainian war and the uncertainty induced by the economic sanctions, and by the higher volatility in the financial and primarily in the commodity markets. The sense of prosperity is possible to improve when the war ends, the uncertainty in the energy markets is eliminated, and lower prices develop.

lakossági index

Compared to last month, all four sub-indices of the household prosperity index have declined. The most favourable is still the perception of the employment situation, the value of which has decreased from last month’s +2.9 to -6.1, thus it has become negative. Households have the most negative perception of the inflation processes, the sub-index of which has slightly decreased further, from -82.5 to -86.3. The perception of the economic environment has changed from the value of -26.5 to -39.4, while that of the financial situation from -14.8 to -24.1.

lakossági alindex

The population is more pessimistic about the development of the economic situation over the past 12 months. The proportion of those who have perceived a significant deterioration has increased from last month’s 39.1 percent to 52.5 percent, while that of those who have experienced a slight deterioration has decreased from 27.4 percent to 23.6 percent. After 10.4 percent in July, 8.5 percent of the population perceived the economic situation as unchanged, while 9.2 percent expected a slight improvement (which was 15.5 percent in June) and 5.2 percent expected a significant improvement (which was 6.3 percent in the previous month).

Deterioration can also be observed in the households’ perception of their own financial situation over the next twelve months, which may be caused by the still high inflation prospects. While in July 40.6 percent said that their financial situation would be much or a little worse over the next twelve months than it had been so far, this rate increased to 57.5 percent in August. Compared to the previous month (34.9 percent), 25.8 percent predicted an unchanged future financial situation, more than 9 percentage points less.

Regarding the population, there was no positive trend for any of the questions.

vállalati index

Regarding the corporate survey, all four sub-indices have become more unfavourable compared to last month. The sub-index of the economic environment has fallen from -37.4 to -43.7, that of the sectoral environment from -18.5 to -24.5, that of the production environment from -12.2 to -15.0, while that of the business environment from -24.4 to -32.7.

vállalati alindexek

There has been a significant negative change in the companies’ perception of the economic situation of the past twelve months, as 46.5 percent perceived a significant deterioration in August compared to 40.0 percent in July, and almost the same proportion as last month’s 33.0 percent, 33.1 percent perceived a slight deterioration. Following the proportion of 11.0 percent in June, 9.7 percent detected unchanged economic situation, while the proportion of those who experienced a slight improvement decreased from 11.0 percent to 6.4 percent, and that of those who perceived a significant improvement decreased from 4.0 percent to 2.1 percent.

At the same time, there has been a slight improvement in the companies’ perception of the forint euro exchange rate development. Compared to the proportion in July, more companies say that the exchange rate will remain unchanged, while fewer expect some degree of depreciation in the future.




 

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, the positive ones (e.g., expected improvement in the economic situation) receive positive scores, while the 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 households and companies perceive the processes in the economy. 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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