Hungarian Utility Price Cuts Help Sentiment Index to 2-Year High

Hungary’s economic-sentiment index jumped to its strongest level in almost 30 months in September, as consumer optimism surged in the wake of government mandated utility-price cuts.

The index rose to minus 11.6, the best reading since April 2011, from minus 14.3 in August, the GKI research institute in Budapest said in an e-mailed statement. Business confidence increased to minus 4.8 from minus 6.3 in August, while the consumer-confidence gauge rose to minus 31 from minus 36.9, equaling its biggest monthly gain since May 2010.

Consumers said their capacity to save had improved, while their financial situation and the possibility to purchase high-value durable goods was better, GKI said. All business sub-indexes except services showed improved confidence, it said.

Prime Minister Viktor Orban, who faces elections next year, has mandated a second round of cuts in regulated utility prices in a bid to court voters, boost consumer spending and lower inflation as the central bank continues to reduce its benchmark rate to new lows. The economy will grow 0.7 percent this year before expanding 2 percent in 2014, the government predicts.

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

To contact the reporter on this story: Marton Eder in Budapest at meder4@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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