Hungarian economic growth below trend

In April 2023, the SZIGMA CI indicator, which provides feedback on the current state of the Hungarian economy, reversed its historical trend of drifting away from the historical trend and started to converge towards it, based on data available until March 2023.

The other indicator, SZIGMA LEAD, is a short-term indicator for the future of the Hungarian economy. The Hungarian economy is still forecast to reach its trough of below-trend growth in April 2023, and from then on to turn around, approach and then exceed its historical trend. In summary, economic growth is expected to strengthen in the near term, but may come to a halt by the end of 2023.

Hungary has the highest effective interest rate (overnight (O/N) deposit rate: 18.0%) in the region, following the October move by the Hungarian central bank.

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.

How did the prices of consumer durables change in March?

The 20.7% increase in new car prices played a particularly important role in the 11.2% average increase in the prices of consumer durables. The prices of heating and cooking appliances also increased at an above-average rate, by 19.6%, while kitchen and other furniture prices rose by 18.9% compared to the same period last year. Washing machines and dishwashers also saw above average price increases of 17.1% on an annual basis in March. Consumer durables inflation is moderated by a 6.6% increase in the prices of computers, cameras and telephones, and a 0.6% decrease in the prices of televisions.

The full report can be downloaded here: 

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.

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