Higher confidence recorded across all sectors

Business and consumer surveys

During the third quarter of 2019, the Economic Sentiment Indicator increased to 101.6 from 96.7 in the preceding quarter.

While it stood slightly above its long-term average of 100.0, it remained below the record high readings registered during 2017 and 2018.

In the quarter under review, higher confidence was recorded across all sectors, with the strongest increase recorded in the retail sector.

This was revealed by the latest edition of business and consumer surveys carried out by the European Commission and published on the Central Bank’s Quarterly Review.

The ESI for Malta remained marginally below that of the euro area, where it averaged 102.5.

Confidence in the retail sector increases significantly

Sentiment in the retail sector rose to 10.5 from 0.0 in the second quarter of 2019, thus rising well above its long-term average of 3.0.

The recent rise in sentiment was driven by firms’ assessment of business activity in the past three months and, to a lesser extent, by their expectations for the three months ahead. Furthermore, the share of respondents that considered their stock levels to be above normal, edged down.

Supplementary survey data indicate that, on balance, orders expectations turned positive in the quarter under review. Although price and employment expectations remained negative, they were significantly less negative than in the second quarter.

Industrial remains negative

confidence

Confidence in the industrial sector improved, but remained negative in the quarter under review. It stood at -6.9, up from -10.9 in the previous three-month period, thus standing slightly below its longterm average of -3.1.

During the third quarter of the year, production expectations increased almost threefold. At the same time, a smaller number of firms reported above normal stocks of finished goods.

By contrast, a higher share of firms reported falling orders.

Additional survey data show that, on balance, there was an increase in the number of respondents anticipating a rise in employment in the three months ahead.

Meanwhile, the share of firms anticipating price increases turned negative over the same period.

Confidence in the services sector rises

Confidence in the services sector remained below its long-term average of 23.0, despite rising to 19.3 from 16.3 in the preceding quarter. The increase in sentiment was driven by higher demand expectations in the coming months and, to a lesser extent, an improvement in the respondents’ assessment of demand over the previous quarter.

Meanwhile, their assessment of the business situation over the past three months weakened further.

Supplementary survey data indicate that the share of respondents anticipating prices to increase in the three months ahead rose substantially. At the same time, employment expectations were less optimistic than in the preceding quarter.

Confidence in construction improves marginally

In the third quarter of 2019, confidence in the construction sector edged up to 26.1, from 23.2 in the preceding quarter, thus remaining well above its longterm average of -12.6.

Survey results show that the increase in sentiment was entirely driven by higher order book levels. On the other hand, employment expectations for the coming quarter weakened.

Supplementary survey data indicate that, on balance, the net percentage of firms reporting positive developments in building activity during the preceding three months decreased significantly.

Meanwhile, labour shortages were less pressing when compared with the second quarter of the year, though still the main factor limiting production. Furthermore, a lower share of respondents anticipated prices to increase in the next three months.

Consumer confidence continues to recover from recent declines

Consumer confidence improved during the quarter under review. It increased to 5.9 from 4.6 in the second quarter of 2019. Although it rose above its long-run average of -11.7, it remained well below the record high reading recorded in the first quarter of 2018.

Consumers’ expectations of major purchases over the next 12 months were the main driver behind the latest increase in consumer confidence, as these were less negative than before. Meanwhile, consumers’ assessment of their past and future financial situation softened.

At the same time, their outlook of the general economic situation in the 12 months ahead also weakened.

Supplementary survey data suggest that, on balance, a smaller share of consumers expected an increase in prices over the next 12 months. At the same time, a higher net percentage of respondents expected unemployment to fall in the months ahead.