Worried While Prospering – A study of the contradictions between consumer confidence and spending in Hungary
Authors:   , Hajdu Csongor 
Published: June 2023

Understanding how people feel about their financial situation and how they act upon that is a noble challenge to take on, but it is due to this complexity that such research can deliver a significant amount of practical relevance and added value to the scientific disciplines. This study examines the occasional discrepancy between declining consumer sentiment and incresing spending in Hungary. Through a well-constructed deliberative investigation the difficulties of this complex topic were turned into important insights and useful learnings, for theoretical consideration as well as for practical utilization. The first key element was the selection of the phenomenon in the focus of the study. The sentiment of people regarding their financial circumstances and the related actions (like spending or saving) are more than just theoretical concepts: they do have a clear manifestation, one that almost everyone experiences. Due to this background, the research was able to rely on and benefit from solid theoretical foundations and a wide range of empirical data. On the other hand, this wide-spread embeddedness of the topic made it challenging to find a proper perspective for the analysis. This is where the second main achievement was realized. In order to maintain the focus of the research, a deliberative investigation method was applied in a mixed method research form. The benefit of this approach is provided by combining an inductive review of the secondary data, including theoretical foundations and empirical findings, with a deductive primary research that validated the hypotheses and revealed additional insights. The results that emerged from this special combination of methods provided important details about how and why people spend, what makes people discontent with their financial situation, what can caise a discrepancy between higher spending and lower consumer confidence levels, how the measurement can be fine-tuned, as well as holistic recommendations for economic and social decision-makers. The findings of this research should help the comprehension of consumer confidence measures, closing the gap in the scientific literature in the discussions around its predictive power, and avoid the misconceptions in regard to its results and what it means for the society and the economy. The study revealed that the increase of expenditure cannot be fully contributed to people being more content with their financial situation: there are several scenarios in which people increase their spending without actually having better financial circumstances. In parallel to this, people who benefit from trends of prosperity might not contribute proportionally to the general improvement of consumer confidence, especially in times of income inequality. The research also pointed out that it is incorrect to consider the consumer confidence as the manifestation of people’s satisfaction with their financial situation: consumer confidence should rather be looked at as the difference between what people would like to achieve and their perceived situation. The study mapped four key turning points along the scale of aspirations. Furthermore, it revealed a significant amount of relativity in consumer confidence: it is not an absolute level, but strongly depends on how people measure themselves to others and to past circumstances in their life. In addition to these, the study formulated recommendations for the polling institutions on how to fine-tune their consumer confidence measurements, through which it could more accurately represent the actual sentiment of people and lead to better comprehension of the results. It is not only the individual-level insights that contain the real value of the research, but also the holistic findings. The study argued that general financial prosperity in a country is not sufficient to make people content with their circumstances. Should this economic improvement be unevenly distributed, leading to growing income gap and inflation in a society with high level of envy, facing scandals of corruption and fraud while aspiring for justice and equality, and aggravated by an oppression to conform and stay silent about discontent; the combination of such circumstances may result in a record-low consumer confidence. Low consumer confidence should not be taken lightly. Theoretical studies and empirical research confirmed that consumer confidence predicts consumer action in a sense that low confidence forecasts low consumer spending level, which can subsequently have a significant negative impact on the economic performance of a country. When this research was conducted between 2019 and 2022, consumer confidence levels across the world appeared to be fragile, with a potential underlying instability and inclination for collapse. With economic and social turmoils following 2020 becoming more prevalent, the economic, political and social decision-makers are strongly advised to take the findings of this study into account and provide the required amount of emphasis on the needs of the society in order to improve the quality of life and financial satisfaction of individuals and ultimately to assure the economic performance and stability that their countries or unions of countries require.