Business and consumer confidence is improving from the record low seen in May 2013 after the banking sector meltdown and seem to be reaching levels not seen since late-2008, according to the University of Cyprus monthly research.
The Economic Sentiment Indicator of the UCy Economic Research Centre (ESI CypERC) improved by four points in April and reached 107.7, up from 103.7 in March, due to an improved business climate in all sectors, as well as an increase in economic confidence by consumers.
The survey said that sectorally, the improvement in services is due to favourable ratings of the economy and an increase in turnover. The climate in the retail sector, construction and manufacturing showed some improvement, but remained in negative territory. Albeit small, the improvement is based on optimism on future sales, employment and output over the next three months.
Consumer confidence has been boosted by less negative assessment of households in the past 12 months, the anticipation of an improvement in the unemployment curve and a less negative stance as regards savings.
Meanwhile, the quarterly Capacity Utilisation Index (productivity) rose to 58% in April, from 54% in January, which in the case of the manufacturing sector remains below the average since October 2011, but the gap seems to be shrinking after April 2013.
The ERC survey said that the improvement in the index is an indication of the mild stabilisation in demand, as manufacturers continue to work below the normal output level.
“Subsequently, significant investments (in this sector) are not expected as the productivity rates with the current facilities, plants and equipment are at relevant low levels.”
In services, where the contribution to GDP is far bigger than manufacturing, the CUI remained at 81% and the same level as in January, which in turn is above the year-earlier level of 78%. The productivity level in the hotels and restaurants sector fell below the January level, but was higher than in April 2014. On the contrary, productivity in the financial services sector has been on a roll, rising quarter on quarter since April 2014.
