Business sentiment improves slightly except in retail

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Confidence in the services sector increases marginally

Confidence among firms in the services sector rose marginally to 26 in the second quarter, from 25 in the preceding quarter. This compares with a long-term average of 21. The rise in confidence was driven by an increase in demand over the preceding three months.

This increase marginally outweighed falls in firms’ assessment of their business situation. Demand expectations were unchanged between the two quarters.

Additional survey data indicate that, overall, in the second quarter the share of firms reporting employment growth in the preceding and following three months rose. On the other hand, while selling price expectations remained positive, a smaller net share of respondents expected to charge higher prices.

Consumer remains positive confidence

The consumer confidence indi- cator stood at 2 in the second quarter, up from 0 in the preceding three-month period. The indicator thus remained well above its long-term average of -21.

Consumer sentiment continued to benefit from a favourable economic situation and labour market conditions. The increase in confidence between the first and second quarter of 2016 was mainly driven by consumers’ savings expectations, which turned slightly less negative.

Additional survey data, in fact, suggests that, a smaller share of consumers expressed the intention to make major purchases over the subsequent 12 months. Also, the share of respondents anticipating a fall in unemployment increased.

The survey also indicates that consumers’ price expectations, increased compared to the preceding quarter.

Confidence in the retail sector declines for the fourth consecutive quarter

Sentiment in the retail sector fell from 14 in the first quarter to 10 in the second quarter, though it still exceeded its long-term average.

Sentiment in this sector continues to benefit from a favourable assessment regarding past business activity. However, this assessment has become less optimistic in recent quarters. Indeed, a deterioration in respondents’ assessment of business activity in the past three months was the key factor behind the recent deterioration in confidence among retailers.

This also fully explains the deterioration in confidence in the second quarter.

On the other hand, the survey indicates an improvement in expectations for business activity over the subsequent three months.

Similarly, although still contributing negatively to the overall indicator, inventory levels decreased between the first and second quarters of 2016.

Additional survey data indicate that, compared with the first quarter of the year, a smaller share of respondents expected their selling prices to rise in the near term. Also, a greater share of respondents expected their labour component and their order levels to increase in the following three months.