According to the February 2024 survey of Századvég Konjunktúrakutató, household economic sentiment deteriorated by 1.0 index points, while business economic expectations decreased by 0.1 index points from the previous month. Thus, the household index, measured on a scale of -100 to +100, weakened to -12.9, while the business index to -11.8. A marked positive change seen in the February survey is that people have revised down their expectations for future inflation. At the same time, the biggest change for companies, from January to February, was the change in the price of their products over the past year.

 

The prosperity index remained in negative territory, determined by the prolonged Russia-Ukraine war and the uncertainty caused by economic sanctions. An even more significant improvement in the sense of prosperity 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.

Three of the sub-indices of the household prosperity index weakened and one improved significantly compared to the previous month, and overall the index corrected slightly compared to January. Employment continued to be the most positively assessed, with a decline from 3.5 in the previous month to 2.1, but remaining positive. Households’ assessment of inflation trends continued to improve, also on the back of favourable data, with the indicator rising from -80.0 in January to -74.9. The perception of the economic environment deteriorated from -14.4 in the previous month to -17.0, while that of the financial situation went from -10.3 to -11.2.

In the household survey, the future inflation expectations of households showed a notable positive shift from January. When asked “What do you think the average inflation rate will be in the next year?”, the majority of respondents still said that it would be in the range above 7%, but the declining data clearly had a positive impact on future inflation expectations. 43.4% of respondents said it would be above 7% (6.9 percentage points lower than in the January survey). However,5.4% (15.1%) more people thought average inflation would be between 4% and 5% in February, and 1.0% (8.8%) and 0.6% (3.2%) more people expected it to be within the central bank’s target range (between 2% and 4%) and between 1% and 2%, respectively.

In February, the sense of prosperity among households improved most in three age groups: the 40-49 age group (from -13.8 to -11.7), followed by the 18-29 age group (from -10.7 to -9.0) and the 30-39 age group (from -17.9 to -17.5). The most optimistic age group is now the 18-29s (-9.0), while the most pessimistic age group is the 50-59s (-18.6). In the oldest age group surveyed (over 60), the current index value is -10.8.

For the business survey, three sub-indices improved, while one weakened. The industry environment index improved from -5.0 to -3.4, the business environment index from -20.5 to -19.0 and the production environment index improved slightly from -9.5 to -8.9. While the economic environment sub-index fell from -17.3 in the previous month to -20.8.

In February 2024, the biggest change for business was their price increases last year. When asked “How has your company been able to change the prices of its products in the past year?”, overall, 1.4 percentage points more respondents said that they had implemented price increases of between 6% and 7% or over 7% in the past year. At the same time, 3 percentage points fewer (16.8%) said they had raised prices by less than 1% compared with January, and 0.8 percentage points fewer (7.0%) said they had raised prices by between 1% and 2%.

When looking at the sectoral breakdown of businesses, it can be seen that business sense of prosperity has increased on average in two sectors. On average, economic sentiment weakened by -0.5 index points in agriculture, -1.3 in industry and -0.4 in services, while it increased by +0.1 points in trade and +3.3 points in construction from January to February. In the case of construction companies, the future return of state support for housing renovation explains the improved sense of prosperity.

• About the prosperity index

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.