2022 Q4 net share of firms reporting better business conditions declined compared to Q3

The latest business dialogue held between the Central Bank of Malta and non-financial corporations shows that in the fourth quarter of 2022, the net share of firms reporting better business conditions declined compared to the third quarter. Indeed, the net percentage of firms reporting an improvement in activity over the three months preceding the interview decreased from 54% in the third quarter to 27% in the fourth quarter. During the quarter under review, 52% of firms contacted reported higher activity while 24% reported a decrease.

Looking ahead, expectations about business conditions are slightly less optimistic compared to the previous round of contacts. In the last quarter of 2022, 47% of the firms interviewed reported that they expect business activity to increase in the next three months, while 16% anticipated a deterioration. Thus, a net share of 31% expected an improvement in short-term business activity. This compares with a net share of 35% in the previous quarter.

Although supply chain disruptions have dissipated slightly, cost pressures remain elevated. Indeed, a net 82% of contacts reported that input prices have increased in recent months.

In reply to an ad hoc question referring to medium-term expectations of unit costs, 27% of firms expected unit costs to remain unchanged over the coming 12 months; 30% foresaw increases of up to 5%, while around 22% of companies anticipated unit cost increases in excess of 5%. None of the companies expected unit costs to decrease. A fifth of companies surveyed were unsure as to how unit costs might develop over the next 12 months.

The share of firms reporting higher selling prices stood at 54% in the fourth quarter. This was marginally down from 55% in the previous quarter. Around 30% of firms surveyed plan to increase prices substantially.

In the fourth quarter of 2022, the net share of firms planning to invest more decreased from 33% to 27%, as the gross share of companies planning to invest more decreased from 54% to 48%, while the share of firms planning to reduce investment was unchanged at 21%.

Despite softening business conditions, a net 58% of firms planned to increase their staff complement, up from 48% in the third quarter. This share was highest among serviceoriented firms (71%). Businesses have continued to express concerns about labour shortages and pressures to increase wages.