The prosperity index remained in negative territory, determined by the prolonged Russia-Ukraine war, the declining but still high inflation environment and the uncertainty caused by economic sanctions. An even more significant improvement in the sense of prosperity will only be possible if the war ends, inflation continues to fall, the interest rate environment becomes more favourable and energy markets see sustained low prices.
Three sub-indices of the household prosperity index improved and one worsened from the previous month, and overall the index rose significantly compared to November. Employment continues to be the most positively assessed, although it has deteriorated from -1.0 in the previous month to -1.2. Households’ assessment of inflation trends improved significantly, also on the back of favourable data, with the indicator rising from -85.9 in November to -81.3. The perception of the economic environment improved from -25.0 points in the previous month to -18.3, while that of the financial situation improved from -17.3 to -12.5.
Compared to November, the biggest positive shift revealed by the household prosperity survey was in the (retrospective) assessment of the country’s economic situation over the past year. When asked “How do you think the country’s economic situation has changed over the past year?”, 6.9 percentage points fewer (36.6%) said it had worsened significantly and 0.3 percentage points more (24.7%) said it had worsened slightly than a month ago. At the same time, there was an increase (+1.3 percentage points) from November to December (from 13.5% to 14.8%) for those who said it had not changed. The response “it has slightly improved” was given by 4.7 percentage points more (15.8% of respondents), while the response “it has significantly improved” was given by 0.7 percentage points more (5.6% of respondents).
Another very important phenomenon among the population in December. The share of those who expect inflation to remain above 7% next year has fallen sharply (by 7.9 percentage points). This is attributable partly to the favourable inflation data released and partly to positive expectations for the future.
It is also worth noting that 24 out of the 27 questions that make up the index show an improving sentiment, whether they are of the retrospective (for the past year) or prospective (for the next year) type. It is worth noting that the last time the value of the sub-index for prospective questions to households (-13.9) was so favourable was in April 2022.
For the business survey, three sub-indices improved. The economic environment index increased more significantly from -23.7 in the previous month to -15.9, the business environment index improved from -21.5 to -19.0, the industrial environment index improved from -6.9 to -2.2, while the production environment index deteriorated slightly, from -8.2 to -9.0.
The biggest positive change for businesses in December 2023 was the change in economic performance over the past year. When asked “How do you think the country’s economic situation has changed over the past year?”, 5.8 percentage points fewer respondents said it had significantly worsened this month compared to November. The response “it has slightly worsened” was chosen by 2.2 percentage points fewer respondents. The response “it has not changed” was chosen by 1.8 percentage points more, the response “it has slightly improved” was chosen by 5.0 percentage points more, and the response “it has significantly improved” was chosen by 1.5 percentage points more.
When looking at the sectoral breakdown, it can be seen that (with the exception of one sector) business sense of prosperity has increased on average. Businesses’ sense of prosperity changed on average by +2.7 points in agriculture, +1.1 points in construction, +2.4 points in trade, +2.5 points in services and -3.0 points in industry from November to December.
In addition to the sub-index of retrospective (past year) questions, it is pleasing that the prospective sub-index has also increased. The prospective index of business sense of prosperity was last better than its December 2023 value in February 2022.
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.