The Malta Independent on Sunday
Economic confidence increases
In July, the Central Bank of Malta’s Business Conditions’ Index (BCI) rose over the previous month and continued to suggest above-aver- age conditions.
With the exception of consumers, amongst which economic confidence remained stable at a high level, economic sentiment increased, as higher confidence was recorded across all other sectors.
In June, tourism activity contin- ued to grow at a strong pace in annual terms. Industrial production increased on a year earlier, while retail trade contracted.
The sharpest increase in sentiment was registered in the retail sector, where confidence rose to 12 after falling to 0 in June. Following this increase, sentiment in the sector rose above its longterm average of 2. The recent rise in sentiment was driven by retail firms’ assessment of past and expected business activity. In contrast, a higher net share of firms reported above normal stock levels.6 Additional survey data indicate that on balance, more firms predicted a rise in employment while fewer firms expected prices to rise in the three months ahead.
Industrial confidence improved further, rising to 15, from 11 in the preceding month.7 Therefore, this indicator remained above its longterm average of -3. Higher sentiment in July was driven by firms’ production expectations and their assessment of stock levels, though on balance, firms’ assessed order books to be below normal. Supplementary survey data show that a smaller share of respondents expected their employment to increase in subsequent months. Going forward, on balance, firms anticipated a rise in selling prices in the three months ahead.
According to the CBM, sentiment in the construction sector rose to 29 in July, from 25 in the preceding month, and stood well above its long-term average of -17.8. Both sub-components contributed to the improved sentiment, with increased order books being the main driver. Additional survey data indicate that compared with June, a smaller share of respondents reported an increase in building activity over the preceding three months. Also, fewer firms expected prices to increase in the months ahead.
Likewise, confidence in the services sector edged up to 32, from 30 in June, remaining above its longterm average of 23. Higher sentiment reflected firms’ assessment of both past and expected demand. In contrast, marginally fewer firms reported an improvement in their business situation. Supplementary survey data indicate that in July, employment expectations were more optimistic than in the preceding month. Also, respondents anticipated a rise in prices, following two months of negative price expectations.
Consumer confidence was unchanged at 23 in July, and continued to stand well above the long-term average of -17. On balance, more firms predicted improved financial and general economic situation in the following months. This was offset by a fall in consumers’ expectations of their sav¬ings over the following twelve months. Also, fewer respondents foresaw a fall in unemployment. Additional survey data show that a smaller share of respondents expected to make fewer major purchases in the following 12 months, while more consumers anticipated higher inflation in the 12 months ahead.
Labour market conditions, meanwhile, remained favourable, with the number of registered unemployed declining further and the unemployment rate falling to a new historical low.
In June, the annual rate of inflation based on the Harmonised Index of Consumer Prices (HICP) rose to 2%.
The annual rate of change of Maltese residents’ deposits eased to 4.5%, while the annual growth in credit to residents accelerated to 3.0%.
As regards fiscal developments, the cash-based Consolidated Fund registered a smaller deficit compared with that recorded in June 2017.
The Economic Update is available on the website of the Central Bank of Malta at www.centralbankmalta.org