The prosperity index remained in negative territory, determined by the uncertainty caused by the prolonged Russia-Ukraine war and the economic sanctions. Significant improvement in economic expectations is likely to occur 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 of the sub-indices of the household prosperity index strengthened compared to the previous month. Employment continued to be the most positively assessed, improving from -4.6 in the previous month to -3.2. The perception of the economic environment improved in November from -29.1 points in the previous month to -27.8, while that of the financial situation improved from -14.2 to -12.0.
It is worth noting that households’ inflation perceptions have improved significantly, as the indicator improved from -66.8 in October to -59.2. The last time this was higher was in December 2021.
Compared to September, the biggest positive shift in the survey of households’ sense of prosperity was that households expected Hungary’s inflation to improve over the next year.
In fact, when asked “What do you think the average inflation rate will be in the next one year?”, the November survey responses showed a more favourable inflation outlook. 0.8% of residents surveyed (0.3 percentage points lower than in October) believe that inflation will be less than 1% next year. 5.2% of respondents (0.4 percentage point more) expect prices to rise between 1% and 2%. It is worth noting that in November, 4.2 percentage points more (17.5%) forecast inflation within the central bank’s tolerance range of between 2% and 4%. 0.3 percentage point less (15.1%) expected prices to change between 4% and 5%. 12.5% of respondents (1.5 percentage points less) expect inflation to reach between 5% and 6%. 7.1%, 0.3 percentage points lower, expect inflation to be between 6% and 7%. A third of respondents (33.5%, 3 percentage points less) expect inflation to be above 7%.
Looking at households’ sense of prosperity by level of education, three of the four categories showed a significant improvement in economic sentiment, while one showed a minimal deterioration. Among those with at most primary school education, those who have completed secondary school and those with vocational school or vocational school leaving certificate, the sense of prosperity has become more positive (by 3.1, 2.8 and 2.5 index points respectively), while among those with tertiary education, it decreased by 0.1 index point. Overall, regarding current economic sentiment, the index value of -15.5 for those with tertiary education is the most optimistic value, followed by -15.6 for those with a vocational qualification or a trade, -15.9 for those with secondary education, then -18.8 for those with primary education or less.
For the business survey, two sub-indices improved, while two weakened. The industry environment index improved from -6.1 to -5.6 and the economic environment index from -30.9 in the previous month to -28.4. In November, the production environment sub-index deteriorated from -9.7 in the previous month to -10.0, while the business environment sub-index deteriorated minimally, from -24.6 in the previous month to -24.7.
Among businesses, the biggest change in November 2024 was regarding the future competitiveness of Hungary.
In fact, when asked “What do you think how Hungary’s competitiveness will change in the next 1 year?” in November, business leaders’ overall forecasts were more favourable than in October. 6.5% of respondents expect a significant improvement (2.6 percentage points more), while 27.3% (4.3 percentage points more) expect a slight improvement. 25.2% (3.6 percentage points less) said that competitiveness would remain unchanged, 21.3% (4.7 percentage points less) said it would deteriorate slightly, and 14.8% (1.2 percentage points more) said it would deteriorate significantly.
Looking at the sectoral breakdown of companies, the sense of prosperity increased for three sectors and decreased for two sectors on average. In November, companies’ economic expectations improved by 9.1 index points in agriculture, by 0.4 percentage points in services and by 0.1 index points in trade, while it fell by 1.1 index points in construction and by 1.9 index points in industry. That month, the strongest sense of prosperity was recorded for agriculture (-6.4) and the weakest for construction (-16.7).
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.
