Hungarian businesses and households show declining confidence

Hungarian businesses and households have seen their optimism falter in August, ending a six-month period of improving economic sentiment. The GKI Business Climate Index showed a notable four-point drop from its July peak, reversing gains made earlier in the year.

On the business side, industrial and construction companies reported a deteriorating operating environment. While commercial and service firms saw a slight improvement in predictability, the overall trend indicates caution. This decline in confidence is particularly concerning given the previous upward trend.

Consumer sentiment also took a significant hit. The consumer confidence index fell by nearly four points, with all four sub-indices showing a decline. The sharpest drop was in the assessment of the country's economic situation over the next 12 months, which plummeted by nine points. This suggests growing uncertainty about the future, which could impact spending decisions.

Despite the worsening economic mood, there are some stabilizing factors. Businesses' expectations for sales prices remained largely unchanged in August, indicating that the recent stabilization after a slowdown in price increases from May to July is holding. Only 16 percent of businesses plan price hikes in the next three months, with 7 percent planning reductions. This suggests that the current dip in confidence is not yet translating into increased inflationary pressure.