The war has further weakened the sense of prosperity

According to the survey conducted by Századvég Konjunktúrakutató in April 2022, the sense of prosperity of both households and businesses deteriorated: on a scale between -100 and +100, the value of prosperity index decreased from -4.8 to -7.5 regarding households, while it decreased from -5.1 to -6.8 regarding businesses. As in the previous month, the Russian-Ukrainian war, the related sanctions, and the induced economic effects played a key role in the development of the indicator. However, unlike the previous month, not only have the outlook for the future deteriorated but the perception of the past as well. A substantial improvement in the sense of prosperity is expected when the war ends, and the effects of sanctions cease.

All four sub-indices of the household prosperity index have deteriorated this month. The most favourable is still the perception of employment, with its sub-index changing to 9.7 compared to last month’s 10.6. As before, the perception of inflation is the most negative, with its sub-index falling to -76.3 compared to last month’s -70.4. The index of the economic environment has deteriorated from -8.8 to -12.3, while that of the financial situation has changed from -2.8 to -5.9.

Of the questions in the questionnaire, we again highlighted two where the rate of change is among the highest. Following the previous month’s decrease, the proportion of those whose average weekly working time is between 30 and 45 hours has increased to 60.0 percent compared to last month’s 56.7 percent. In contrast, the proportion of those whose weekly working time is below 30 hours has decreased from 9.5 percent to 7.8 percent, and that of the employees working more than 45 hours a week fell from 33.1 percent to 31.9 percent, i.e., both the number of overemployed and underemployed people has decreased. The question is how long this change will last or how much it can be attributed to individual effects.

Expectations of wage increase have also become more unfavourable due to deteriorating inflation perception. When asked how much wage increase respondents expect for the next twelve months, similar to the previous months, 3.4 percent said they presumed it would significantly exceed inflation. Compared to 16.9 percent in March, 13.1 percent expect a wage increase slightly above inflation, while the proportion of those who expect a wage increase equal to inflation is 23.1 percent compared to previous month’s 22.2 percent. The proportion of those who expect a wage increase slightly below inflation is 23.0 percent instead of 20.0 percent, while that of those who expect it to significantly lag behind is 24.1 percent instead of 17.3 percent. The proportion of those who could not answer fell from 19.8 percent to 13.3 percent.

According to the results of the corporate survey, three of the four sub-indices have deteriorated, and one has improved. There has been an increase in the production environment, with its index increasing from -4.5 to -3.0. The perception of the sectoral environment remains the most favourable, with its sub-index significantly decreasing from 6.4 to 0.4. The perception of the economic environment has changed from -14.0 to -20.2, while that of the business environment has changed from -2.3 to -8.9.

In the case of the company questionnaire, we also highlighted two issues for which there has been a significant change compared to the previous month. The proportion of those who say that the country’s economic situation significantly has deteriorated in the past twelve months has increased from 21.9 percent to 25.5 percent by April, while that of those who say it has slightly deteriorated has increased from 23.5 percent to 28.2 percent. The proportion of those who feel it remains unchanged has changed form 19.0 percent to 15.9 percent. Meanwhile, the proportion of those who feel it has slightly improved has decreased from 22.5 percent to 19.8 percent, while that of those who feel it has significantly improved has decreased from 11.9 percent to 8.1 percent.

The task of the prosperity research conducted by the Századvég Konjunktúrakutató Zrt. is to provide decision makers and analysts with information about the current and expected processes of the economy in the near future. Our institute has been compiling corporate and household prosperity indices on a monthly basis since August 2019. In our monthly survey, we ask 1,000 company executives and 1,000 adult residents about their perception of the economic situation and their expectations thereof. Regarding the two groups, we ask 29 and 28 questions, respectively, which cover a wide range of economic life. Of the responses, positive ones (e.g., expected improvement in the economic situation) receive positive scores, while negative ones (expected decline in employment) receive negative scores. Then, by averaging the scores and converting them to a scale between -100 and +100, the prosperity indices are obtained. Thus, the higher the value of the prosperity indices, the more favourable the processes in the economy are for households and companies. In addition, regarding both household and corporate surveys, we also prepare 4 sub-indices for each by using some of the questions, which illustrate the development of economic well-being in an area.