Economic sentiment improved in August
Economic sentiment in Cyprus improved in August as the Economic Sentiment Indicator (ESI) of the University of Cyprus Economics Research Centre increased by 5.1 points to 115 points compared to July’s 109.9, as a result of the pickup of business confidence in services, retail trade and industry. But construction remained in the doldrums, while consumer confidence was up marginally.
The monthly survey found that the Services Confidence Indicator rose due to firms’ more positive assessments of past business situation and demand, as well as because of more optimistic views regarding firms’ turnover over the next three months.
The Retail Trade Confidence Indicator increased as a result of more positive responses regarding firms’ past sales and more optimistic sales expectations over the next three months.
The increase in the Industry Confidence Indicator is driven by the upward revision of firms’ assessments of production plans over the next three months, as well as by the improvement of firms’ views of the level of their current order books and stock of finished products.
The Construction Confidence Indicator deteriorated due to more pessimistic assessments of the level of current order books and downward revisions employment expectations.
The Consumer Confidence Indicator increased marginally as the improvement of consumers’ assessments of future economic
firms’ conditions (households, country, labour market) was offset by the deterioration of savings expectations.
Although different in numbers, according to DGECFIN services of the European Commission, the Cyprus ESI increased by almost 6 points to 116.2 in August (from 110.1 in July), mainly due to increase in services confidence from 14.3 points in July to 26.6 in August and retail trade that turned positive (from -1.2 to 3.3). Construction expectations remain negative (-24.4 -31.7), consumer confidence was slightly better (-8.2 -6.9 ) and the sentiment in the industry sector significantly turned around (-0.3 to 8.3 ).
In August 2016, the Business Climate Indicator (BCI) for the euro area decreased markedly (by 0.36 points to +0.02), as managers’ assessments of past production, the level of overall and export order books deteriorated markedly. Production expectations worsened much less and views on the stocks of finished products remained stable. The same can be said also for the ESI (down by 1.0 points to 103.5) and the EU (by 0.9 points to 103.8)
The deterioration of euro-area sentiment resulted from weakened confidence in all business sectors but construction, as well as, to a lesser extent, among consumers. The ESI declined in four of the five largest euroarea economies, namely in the Netherlands (-3.6), Italy (-2.1), Spain (-1.5) and Germany (-1.1), while it booked an increase in France (+0.8).