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Hungarian consumer confidence plunges in August to lowest since April 2020

·1-min read

BUDAPEST (Reuters) - Hungarian consumer and business confidence both deteriorated further in August, a survey by think tank GKI showed on Monday, with households' confidence plunging to its lowest since April 2020, the first wave of the COVID-19 pandemic.

Hungarian households turned gloomier about their financial prospects amid a surge in inflation and energy prices.

"The GKI consumer confidence index is in a freefall," the think-tank said. "Consumers' inflationary expectations strengthened further in August after a pause in July."

GKI's consumer confidence index plunged to minus 49.2 points from minus 41.7 in July, and was down sharply from minus 17 in February. The overall index, which includes both households and businesses, fell to minus 14.3 points from minus 9.4 in July.

The GKI said companies' plans to hike prices got a new impetus, especially among industrial companies, in August, while more than 70% of retail sector firms said they planned to increase their prices.

With soaring energy costs and a weak forint, the National Bank of Hungary (NBH) faces the challenge of fighting persistent inflation while maintaining momentum in the Hungarian economy.

The central bank is expected to raise its base interest rate by 100 basis points to 11.75% on Tuesday, with more hikes to come this year as inflation keeps rising.

Deputy Governor Barnabas Virag said earlier this month that inflation could peak later and at a higher rate, around 18% to 19%, than previously expected, and start declining only from next year at a slow pace. Hungarian core inflation surged to an annual rate of 16.7% in July, the highest in 25 years.

(Reporting by Krisztina Than; Editing by Christian Schmollinger)