The prosperity index remained in negative territory, determined by the prolonged Russia-Ukraine war and the uncertainty caused by economic sanctions. Further significant improvement in economic expectations will be possible if the war ends, inflation remains in the central bank’s target range (between 2% and 4%), the interest rate environment becomes more favourable and energy markets see sustained low prices.
All sub-indices of the household prosperity index improved compared to the previous month. Employment continued to be the most positively assessed, with an improvement from 1.7 in the previous month to 2.4, still in positive territory. Households’ perception of inflation trends has become significantly more positive, as the indicator continued to improve from -71.9 in May to -67.1. The perception of the economic environment improved markedly in June from -24.5 points in the previous month to -18.6, while that of the financial situation improved from -10.7 to -9.0.
In the household survey, the assessment of Hungary’s economic situation in the coming year showed a notable positive shift compared to May.
In fact, when asked “How do you see the country’s economic situation changing in the next year?, significantly fewer respondents (14.8% in June, down from 18.2% in May) said it would get significantly worse. The response “it is slightly worsening” had a share of 19.0%, down from 22.9% last month. Meanwhile, the share of respondents who think that the country’s economic situation will not change increased by 1.0 percentage point, the share of those who think that the country’s economic situation will improve slightly increased by 6.5 percentage points, and the share of those who think that Hungary’s economic situation will improve significantly increased by 1.3 percentage points. These categories were therefore answered by 26.6%, 27.1% and 6.1% of respondents, respectively.
Looking at the sense of prosperity of the population by type of settlement, the largest improvement in economic sentiment was observed in rural areas. On average, people living in cities are the most optimistic (-9.4), followed by people living in villages (-11.1), county seats (-13.1) and the capital (-16.9).
For the business survey, two sub-indices improved, while two weakened. While the economic environment index improved from -21.0 to -20.3, and the production environment index from -11.5 to -9.6, the industrial environment index deteriorated from -4.4 to -5.3, and the business environment index from -20.4 to -20.5.
The biggest change for businesses in June 2024 was in recent profit expectations. In fact, when asked “How do you expect your company’s profits to change over the next 12 months?”, business leaders gave an overall higher profit forecast in June. Compared to the May results, 0.4 percentage points fewer (4.6%) said that their company’s profits would fall significantly in the next 12 months. In addition, 1.4 percentage points fewer (18.3%) forecast a slight decline in profits. However, 2.2 percentage points more expect profits to remain unchanged. Slightly higher profits are expected by 2.4 percentage points less (29.4%). And 2.6% of companies expect a significant increase in profits, up 0.8 percentage points.
Looking at the sectoral breakdown of companies, the sense of prosperity increased for three sectors and decreased for two sectors on average. While the average sense of prosperity rose by 5.1 index points in agriculture, 2.5 index points in construction and 1.8 index points in services, the average sense of prosperity fell by -0.5 index points in industry and by 1.6 index points in trade in June. This month, the strongest sense of prosperity was recorded in industry (-8.9) and the weakest in trade (-15.2).
The purpose of the prosperity survey conducted by Századvég Konjunktúrakutató is to provide information to decision-makers and analysts on current and near-term economic developments. Since August 2019, our Institute has been producing the business and consumer prosperity index on a monthly basis. Our monthly survey asks 1,000 business leaders and 1,000 adult residents about their assessment of the economic situation and their expectations. For the two groups, we ask 29 and 28 questions respectively, covering a wide range of economic life. Among the responses received, positive ones (e.g. expected economic improvement) are given a positive score, while negative ones (expected decrease in employment) are given a negative score. The scores are then averaged and converted to a scale between -100 and +100 to obtain the prosperity indices. Thus, the higher the value of the prosperity indices, the more positive households’ and companies’ perception of the economy is. In addition, for both the household and the business survey, 4 sub-indices are constructed using a subset of the questions to illustrate the evolution of economic sentiment in a particular area.
