The prosperity index remained in negative territory, determined by the prolonged Russia-Ukraine war and the uncertainty caused by economic sanctions. 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.
Three of the sub-indices of the household prosperity index weakened and one strengthened compared to the previous month. Employment continued to be the most positively assessed, with a decline from -0.6 in the previous month to -3.3, i.e. it had been slightly negative for the second month in a row. The perception of the economic environment weakened in August from -21.7 points in the previous month to -30.0, while that of the financial situation went from -11.2 to -14.6. At the same time, households’ perception of inflation trends has improved, with the indicator improving from -69.8 in July to -64.1.
In the household survey, the largest negative shift from July was in the change in Hungary’s economic situation over the next year.
In fact, when asked “How do you see the country’s economic situation changing in the next year?”, in August, a more negative sentiment emerged from households’ responses. This month, 25.5% of respondents, 6.6 percentage points more, selected the category “significantly worsening”; 22.7% of respondents, 0.5 percentage points more, selected the category “slightly worsening”; 23.1% of respondents, 0.4 percentage points less, selected the category “no change”; 18.2% of respondents, 3.6 percentage points less, selected the category “slightly improving”; and 4.4% of respondents, 3.2 percentage points less, selected the category “significantly improving”.
Looking at the sense of prosperity of households by level of education, the sharpest fall in economic sentiment was among those who had completed elementary education at most, for whom the prosperity index fell by 6.0 index points. Among those with vocational qualifications or skilled workers, the prosperity index fell by an average of 3.3 index points, and by 3.5 index points among those with secondary school qualifications. Meanwhile, among those with a college or university degree, the economic sentiment indicator deteriorated by 1.7 index points. Thus, regarding current economic sentiment, the index value of -15.3 for those with tertiary education is the most optimistic value, followed by -17.3 for those who have vocational qualifications or are skilled workers, -19.3 for those with secondary education and -20.6 for those with primary education or less.
For the business survey, two sub-indices improved, one stagnated, and one weakened. The industry environment sub-index increased from -6.3 to -5.6 and the business environment sub-index increased from -25.2 to -24.6. The production environment sub-index stagnated at -10.9 index points in August. The business environment sub-index decreased from -27.6 in the previous month to -29.3.
The biggest change for companies in August 2024 was the change in the prices of their products over the past year. When asked “How has your company been able to change the prices of its products in the past year?”, company managers reported lower overall price changes in August. Compared to the July results, 3.7 percentage points more (21.6%) said they had increased their product prices by less than 1%. Furthermore, 0.9 percentage points more (8.8%) increased the prices of their products by between 1% and 2%. In addition, 0.5 percentage points less (7.2%) increased their prices by between 2% and 4%, 0.5 percentage points more (10.9%) increased their prices by between 4% and 5%, 1.3 percentage points more (7.7%) increased their prices by between 5% and 6%, and 1 percentage point more (5.5%) increased their prices by between 6% and 7%. However, 26.7% of the companies surveyed reported price increases above 7%, which is 6.4 percentage points lower than in July. The lower pace of product price increases by companies has a positive impact on inflation developments.
However, when looking at the future price expectations of firms over the next year, it should be noted that there is a shift between the no change category and the small increase category. The former increased by 4.8 percentage points to 36.6%, while the latter rose by 6.3 percentage points to 50.5%. The other categories show only slight shifts.
Looking at the sectoral breakdown of companies, the sense of prosperity increased for two sectors and decreased for three sectors on average. While the average sense of prosperity increased by +1.7 index points to -11.6 index points in construction and by +0.8 index points to -17.9 index points in trade, the average decline in businesses’ economic expectations in August was due to the -5.4 index points for industry, -0.3 index points for services and -0.6 index points for agriculture. This month, the strongest sense of prosperity was recorded in construction (-11.6) and the weakest in trade (-17.9).
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.
