Macro Monitor – August 2023


At its meeting in August, the Monetary Council of the central bank did not change the base rate (13%) but continued to cut the policy rate. The central bank cut its effective rate, the overnight deposit facility rate, by 100 basis points to 14.0%.

Raw data show that retail sales decreased by 7.8%, while calendar-adjusted data show that it decreased by 8.3% in June 2023, compared to the same period of the previous year. Within this, sales increased by 4.8% in specialised and non-specialised food shops and by 4.3% in non-food shops. The turnover volume of petrol stations fell by 24.2%, significantly more than the other main groups.

In August 2023, the value of the SZIGMA CI indicator, which provides feedback on the current state of the Hungarian economy, was -0.45 up to July 2023. Although close to the historical trend, it was still slightly below it, meaning that the Hungarian economy was still growing below the historical trend.

The other indicator, SZIGMA LEAD, is a short-term indicator for the future of the Hungarian economy. The indicator continues to point to a double turnaround, firstly indicating a positive stronger economic growth. Second, it indicates a stagnation and decline in the growth rate.

In an environment of higher interest rates and higher inflation, the trend towards a preference for premium Hungarian government bonds with above-inflation yields over those with fixed yields continued.

Inflation is falling in EU member states

In July 2023, the disinflationary trends that have been underway since the beginning of the year continued in both the European Union (6.1%) and the euro area (5.3%). Compared with a year ago, the inflation rate has fallen by 3.7 and 3.6 percentage points in the EU and the euro area respectively. Inflation was 3.2% in the United States, 6.8% in the United Kingdom and 3.3% in Japan in July. China, on the other hand, is already experiencing deflation, with prices falling by 0.3% compared with a year earlier.

• The SZIGMA indicator system

The SZIGMA (abbreviation of the Hungarian name “Századvég Index a Gazdasági Momentum Alakulásáról”, in English: Századvég Index of the Development of Economic Momentum) is a simultaneous and preliminary indicator system developed by Századvég for the Hungarian economy.

It is crucial for economic policymakers and analysts to have an accurate picture of the state of the economy, but statistical data are often available with considerable delays. In contrast, the SZIGMA indicators provide information on the economic cycle and the business cycle within 30 days of the reference month, on a monthly basis.

The indicator system consists of two indicators, the SIGMA CI, which summarises the current state of the economy, i.e. information extracted from simultaneous variables, and the SIGMA LEAD, which provides preliminary information on the expected economic trajectory. A positive CI index means that economic growth is above the historical trend, and a negative CI index means that growth is below the historical trend. The SIGMA LEAD indicator provides a short-term forecast for a 9-month period. If the SIGMA LEAD indicator is positive, growth is expected to be above trend in 9 months’ time (i.e. three quarters of a year later), while if it is negative, growth is expected to be below trend in the near future.