Business sentiment improved slightly in September

According to the September 2023 survey of Századvég Konjunktúrakutató, the sense of prosperity among households deteriorated slightly, while the sense of prosperity among businesses improved. The household index, measured on a scale of -100 to +100, fell from -21.4 to -23.0, while the business index improved from -19.3 to -17.5. The prosperity index remained in negative territory, determined by the prolonged Russian–Ukrainian war, the still higher inflation environment and the uncertainty caused by economic sanctions. A major improvement in the sense of prosperity will only be possible if the war ends, inflation continues to fall, the interest rate environment becomes more favourable and energy markets see sustained low prices.

Three sub-indices of the household prosperity index fell and one improved compared to the previous month, and, overall, the index weakened compared to August. Employment continued to be the most positively assessed, with a decline from -3.2 in the previous month to -5.9. Households were most negative about inflation, although this index improved compared to the August figure, rising from -85.3 to -84.7. The perception of the economic environment deteriorated from -30.3 in the previous month to -30.4, i.e. within the margin of error, while that of the financial situation went from -18.9 to -20.9.

The fact that slightly more people believe that inflation will fall sharply in the future is a positive shift in the forecast for households. In other words, when asked “What will the inflation rate be next year?”, more respondents said it would be lower than a month ago: 3.0% (up 0.2 percentage points) expect 1-2%, 5.9% expect it to be in the inflation target range, i.e. 2-4% (up 1.5 percentage points), while another 7.3% expect it to be 4-5% and 7% expect it to be 5-6%. The former is 1.7 percentage points higher than in August, while the latter is 0.9 percentage points higher.

For households, the biggest negative shift in September was in the length of time spent at work. After the previous month’s spike, a rebound is observed. The share of those working more than 30 hours a week but less than 45 hours a week fell significantly (from 56.4% to 51.5%). Meanwhile, the percentage of those working 30 hours or less increased more significantly, by 3.7 percentage points, from 6.4% to 10.1%, and the percentage of those working more than 45 hours increased by a smaller 1.4 percentage points, from 36.5% to 37.9%.

The business survey showed an improvement in all four sub-indices. The economic environment index increased more significantly from -34.7 in the previous month to -31.9, the business environment index increased from -29.2 to -26.6 and the industrial environment index improved from -15.6 to -11.9, while the production environment index improved less sharply, from -13.0 to -11.9.

For businesses, the most negative change of opinion was for investments made in the last year. Indeed, according to the responses of the business leaders surveyed, the September figure fits into a clear downward trend: 30.0% (up from 32.8% in the previous month) indicated that they had invested in the past year.

The most positive change was in businesses’ estimates of their export activity in the next year. There is a clear shift towards increasing exports. While only 3.1% of business leaders said in August, 4.7% said in September that exports would increase slightly in the coming year. Significant export growth is still expected only by a small share of the business leaders surveyed (0.2%, down from 0.4% last month). A significant decline in exports is forecast by 0.1% of respondents, down from 0.8% in the previous month. A slight decrease in exports is expected by 1.5% of respondents (0.4 percentage points more than in the previous month). Unchanged exports are expected by 8.0%, down 1.6 percentage points from the August survey. 85.4% of the business leaders surveyed answered that they “do not export and do not expect to export in the next year”, which is 0.8 percentage points higher than in the previous month.

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.