In March, the sense of prosperity slightly improved among the population, while it slightly deteriorated among companies


In March, the sense of prosperity slightly improved among the population, while it slightly deteriorated among companies

According to the March 2023 survey of Századvég Konjunktúrakutató, the sense of prosperity of the population and businesses has changed in opposite directions. On a scale between -100 and +100, the value of prosperity index increased from -20.3 to -19.2 regarding households, while it decreased from -13.0 to -15.2 regarding businesses. The sense of prosperity index remaining in the negative range is still determined by the higher inflation environment induced by the Russian-Ukrainian war and the uncertainty induced by the economic sanctions. Less turbulence and falling prices and exchange rates in financial, foreign exchange and commodity markets than in previous periods reduced uncertainty.  At the same time, the sense of prosperity is possible to significantly improve when the war ends, inflation moderates significantly after peaking, the great uncertainty in the energy markets is eliminated, and sustained low prices develop.

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Three of the 4 sub-indices of the population’s sense of prosperity have improved and one stagnated compared to the value of last month, and overall, the index has also become more favourable compared to that of February. The most favourable is still the perception of the employment situation, the value of which has increased from last month’s -2.5 to -1.3. Households have the most negative perception of the inflation processes, the sub-index of which has remained -88.0. The perception of the economic environment has increased from the value of -27.1 to -25.7 compared to last month, while that of the financial situation has become -16.9 after -18.1.

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In March, the biggest positive shift in the case of the population was in terms of the development of Hungary’s competitiveness for next year. Indeed, 3.2 percentage points fewer people expect a significant deterioration this month, and 2.4 percentage points fewer estimate a slight deterioration. 0.2 percentage points more people expect no change, and 3.4 percentage points more people expect a slight improvement. In addition, 0.4 percentage points more people believe that Hungary’s competitiveness will improve significantly in the coming year.

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Regarding the corporate survey, the value of all four sub-indices have become more unfavourable compared to the previous month. The index of the economic environment has deteriorated from last month’s -23.9 to -26.8, that of the sectoral environment from -8.9 to -9.4, that of the production environment from -8.8 to -11.2, while that of the business environment from -21.0 to -22.5.

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On a positive note, companies expect a smaller increase in the prices of goods and services they buy than in February: the proportion of those who believe prices will increase significantly decreased by 4.1 percentage points.

In the breakdown of the corporate prosperity index in March, the sub-index of the production environment is the second best sub-index next to the sectoral sub-index. This sub-index also includes the mentioned price competitiveness issue, the answers to which suggest that inflation developments may also develop more favourably.

Among companies, this month, 6.1 percentage points fewer said they had invested in the past twelve months.

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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