Hungary Sentiment Index Edges Higher in June After May Plunge

Hungary’s economic sentiment index rose in June after the gauge plunged the most since the onset of the global credit crisis in the country in late 2008.

The index improved to minus 24.5 from minus 24.9 in May, the GKI research institute in Budapest said today in an e-mailed statement. The business confidence index decreased to minus 14.6 from minus 14, while the consumer confidence index rose to minus 52.6 from minus 55.9.

Business confidence deteriorated further while consumer expectations “recovered about half of the extremely big drop seen in May,” GKI said, adding that consumer confidence was still at the weak level seen in October 2009.

Hungary’s economy contracted 1.2 percent in the first quarter from the previous three months, raising the risk of a recession. The government submitted to parliament changes to a disputed central bank law as it seeks to resume financial-aid negotiations with the European Union and the International Monetary Fund after talks collapsed in December.

The forint gained for a sixth day and traded at 285.01 per euro yesterday afternoon, its strongest level since May 7 on optimism that bailout talks will start soon. The benchmark BUX (BUX) stock index has advanced 10.3 percent this month.

Sentiment in the manufacturing industry, the engine of the economy, and the services sector deteriorated in June, while the outlook among construction and retail business improved somewhat, according to GKI.

Households’ perception of their financial situation over the next year and their ability to save improved, GKI said, adding that consumers’ assessment of their current financial situation was at the lowest since the institute started the index in 1993.

Prime Minister Viktor Orban will introduce new taxes on phone calls, financial transactions and insurance products to trim the budget deficit below the EU’s 3 percent of economic output limit and end an excessive-deficit procedure.

GKI’s indexes are calculated based on a balance of positive and negative answers to questions about the outlook for the economy.

To contact the reporter on this story: Edith Balazs in Budapest at ebalazs1@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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