GKI Index on two-years’ top

In July the seasonally adjusted Business Confidence Index of GKI reached its highest value measured in 2008.

The survey of GKI Economic Research Co.
(www.gki.hu) sponsored by the European Union indicates that this is
basically the result of the improvement in household’s
expectations. Following stagnation in the first two months of 2008
and fall in the subsequent three ones, the value of GKI consumer
confidence index set to increase in May, and it reached a two-years’
high in July. Currently it is higher than it was in June 2006 when on
the new of austerity measures it plummeted from its record high that
had been reached during the parliamentary elections. In July,
household expectations concerning their own financial position and
savings capability as well as unemployment improved significantly.
Opinions concerning living costs and the possibilities of buying
high-value durable consumer goods, too, turned more upbeat.

Although still being rather
pessimistic, they are. Business expectations, too, were up compared
to June, but the size of the change is insignificant.

In the
business sector, the confidence index of all sectors improved. In
industry, the present increase of the index was modest, the trend is
deteriorating, in line with European ones although its speed is
somewhat slighter. In July, the assessment of production in both the
past and the next period was somewhat more downbeat than in June. The
intention of employment by companies, too, deteriorated. The
evaluation of the stock of orders improved slightly, but that of
export orders became more unfavourable. The decrease of inventories
produced by companies played the major role in the increase of the
industrial confidence index. On the other hand, capacity utilisation
and the length of the period covered by contracts increased compared
to the previous quarter.

The confidence index of construction
has been growing for months, although rather slowly, and in July it
reached a one-year’s high. Nevertheless, it is still very low. The
evaluation of production improved, that of the stocks of orders
definitely deteriorated. On the other hand, employment intentions
gained in momentum.

In 2008, the confidence index of trade
tends to increase, and in July it reached an annual peak with a
significant jump. Expectations concerning sales improved slightly,
those regarding orders became much more upbeat compared to the
previous month. The assessment of inventory levels deteriorated
somewhat.

Following the drop in June, the confidence index of
services was slightly up again in July, but this did not represent
any change in the sideway movement without trend that has been
recorded for two years. The assessment of business deteriorated to
some extent in the past three months, expectations concerning sales
in the next three moths did not change, whereas employment
perspectives improved compared to the previous month.

Since
the trough registered in April that must have been related to a large
extent to the disintegration of the coalition government, the
evaluation of the perspectives of the Hungarian economy has been
improving in every sector and among households as well, but still it
is pessimists that are in overwhelming majority. The intention of
raising prices increased in industry and construction, but it eased
in trade and services, the inflationary expectations of consumers did
not change compared to June.