GKI's economic sentiment index finished the year at record high

In December the value of GKI's economic sentiment index adjusted for seasonal effects stayed at the level of November. The index has not been as high as now since four and a half years. According to the survey conducted by GKI Economic Research Co. (www.gki.hu) with the support of the European Union, the business sentiment index increased, the consumer sentiment index decreased compared to November.

As far as the business sphere is concerned, expectations became more upbeat in trade and industry; they turned downbeat in construction and remained unchanged in services. In industry, the assessment of past and future production and that of stock of orders (among this that of exports) improved further. Respondents assessed the stocks of their own production slightly higher. In construction the confidence index fell somewhat in December following two months of increase. Construction is the most pessimistic industry. The assessment of production in the past three months improved slightly, but that of the stock of orders fell. In trade expectations improved further. The assessment of sales positions improved much, but expectations on orders turned worse. Nevertheless, average stocks were considered higher than before by the respondents. Expectations in services remained unchanged in December. Intentions to employ became better in industry, trade and services; they turned worse in construction and fear from unemployment picked up among households. Intentions to increase prices were higher in all sectors, whereas in construction companies planning a decrease in prices were still in a majority. In industry and particularly in trade intentions to increase prices became more pronounced. In construction companies planning price reductions are in majority, their share increased in December. In services efforts aiming at price rises weakened. Consumers' inflationary expectations increased further. The assessment of the prospects of the Hungarian economy deteriorated significantly among households and in all sectors, too. Following a spectacular increase between April 2009 and June 2010, GKI's consumer confidence index fluctuated in the second half of 2010. It stagnated at a rather high level in the past few months and fell in December. The assessment of consumers' own financial position deteriorated slightly and the prospects of their saving capacity for the next 12 months also turned somewhat worse. Households were still a lot more positive in the assessment of the future than the past, and this gap got even larger in October. More respondents felt the purchase of big ticket durables more probable at present, but less respondents in the long run. Households evaluate the future more optimistic than the past. Nevertheless, the gap set to diminish.