Hungarian consumer confidence plunges as inflation rises

The Hungarian forint and euro banknotes can be seen in this illustrative photo taken in Budapest on February 6, 2014. REUTERS / Bernadett Szabo

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BUDAPEST, Nov.22 (Reuters) – Hungarian consumer confidence has plunged to its lowest level since April, a survey by think-tank GKI revealed on Monday, as households gloom over their employment and financial prospects in a context of inflation.

Hungarian inflation soared to 6.5% per year in October, above expectations and driven in part by a 30.7% increase in fuel prices, prompting Prime Minister Viktor Orban’s government to impose a three-month price cap.

Hungary’s central bank, which expects inflation to exceed 7% in November, has been forced to step up the pace of its monetary tightening campaign to contain inflation and support the forint, which has bypassed its all-time lows of April 2020 last week.

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“All players in the economy are expecting price hikes,” GKI said in its monthly survey, which showed business confidence peaked 2.5 years, driven by stronger optimism in most branches of the economy, with the exception of services.

“However, consumer (confidence) has fallen to an extent rarely seen in a single month, sending it to levels last seen in the spring,” GKI said.

He said concerns about unemployment had risen dramatically, even as the share of companies planning to increase hiring exceeded that of planned layoffs across all branches of the economy.

Companies were forecasting price hikes, while consumer inflation expectations also jumped, according to the survey. He said households as well as businesses in the industrial and service sector had become gloomier about the outlook for the economy.

Customers were also more pessimistic about their financial and savings outlook in November, breaking a six-month period of improvement, according to the survey.

Facing a close election next year, Orban’s government inundated the electorate with handouts, including a $ 2 billion income tax refund for families and an extra month of retirement.

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Reporting by Gergely Szakacs; Editing by Giles Elgood

Our Standards: Thomson Reuters Trust Principles.

Laura T. Thrasher