The negative impact of the war and the energy crisis remains decisive in the sense of prosperity of the population and companies


The negative impact of the war and the energy crisis remains decisive in the sense of prosperity of the population and companies

According to the October 2022 survey of Századvég Konjunktúrakutató, the sense of prosperity of both the population and businesses has slightly decreased: on a scale between -100 and +100, the value of prosperity index decreased from -26.3 to -29.9 regarding households, while it decreased from -24.8 to -26.1 regarding businesses. The decline in the indicator of businesses 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, primarily in the foreign exchange market this month, an in the commodity markets. The sense of prosperity is possible to significantly improve when the war ends, the great uncertainty in the energy markets is eliminated, and lower prices develop.

1

All sub-indices of the sense of prosperity of the population have deteriorated compared to last month, thus, overall, the index has deteriorated compared to September. The most favourable is still the perception of the employment situation, the value of which has decreased from last month’s -8.1 to -13.8, thus it has been negative for a quarter of a year. Households have the most negative perception of the inflation processes, the sub-index of which has slightly decreased from -86.4 to -87.2. The perception of the economic environment has decreased from the value of -35.8 to -41.5 compared to last month, while that of the financial situation from -24.2 to -24.8.

2

The population is more pessimistic about the domestic unemployment data of the previous 12 months. The proportion of those presuming a significant decline changed to 5.3 percent from 7.3 percent in the previous month, while the proportion of those perceiving a small decrease changed from 21.0 percent to 16.4 percent. Following 29.8 percent in September, 28.1 percent of respondents perceived the employment rate as unchanged, while 22.8 percent perceived a slight increase (compared to 19.4 percent in September) and 17.3 percent detected a significant increase (compared to 12.5 percent in the previous month).

The biggest positive shift in the case of the population occurred in the perception of next year’s economic situation. 1.3 percentage points fewer people expect a significant deterioration, while 5.6 percentage points fewer people estimate a slight deterioration, 4.2 percentage points more people expect an unchanged situation, and 1.1 percentage points more people expect a slight improvement. Furhtermore, 0.4 percentage point more people believe their financial situation will be much better compared to the data a month ago.

3

Regarding the corporate survey, the value of three of the four sub-indices has become more unfavourable compared to last month. The sub-index of the economic environment has deteriorated from -42.2 to -45.9, that of the sectoral environment stagnates at -30.4, that of the production environment has changed from -16.7 to -17.6, while that of the business environment -34.2 to -35.0.

4

However, companies are more optimistic about their profit expectations for the next 12 months in October after the previous month's data, that is, fewer companies expect their profits to fall, while several companies outright project profit growth. Profit is expected to fall significantly by 15.8 percent (19.6 percent in the previous month) and slightly declining by 32.7 percent (31.3 percent in the previous month). Unchanged profit is expected by 0.4 percentage point more people. A slight increase in profit is expected by 15.0 percent (13.9 percent in September) and a significant increase is expected by 1.6 percent (1.5 percent in September).

Companies are most negative about the change in the economic situation in the country over the past 12 months. In fact, 51.3 percent of the companies surveyed (an increase of 6.3 percentage points compared to the previous month) believe that the country's economic situation has deteriorated significantly over the 12 months. A slight deterioration is observed by 32.7 percent of companies (0.2 percentage points higher than in the previous month). 6.5 percent said the economic situation remained unchanged (compared to 10.2 percent in the previous month). Furthermore, 6.2 percent say the economic situation has improved slightly and 0.9 percent say Hungary's economic situation has improved significantly.


 

About the prosperity index

The task of the prosperity research conducted by 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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