Economic sentiment improved before Lockdown III

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Economic sentiment significantly improved in April, increasing by 9.2 points since March as confidence grew in the services sector before Lockdown III, according to a University of Cyprus index (ESI-CypERC).

The index now stands at 96.5 from 87.3 in March. Still, it is up 16 points from a year ago when in April 2020 (the first lockdown), the ESI-CypERC stood at 80.5.

However, the UCY survey was completed before the government ordered the third lockdown on 26 April to control the pandemic.

The increase in the ESI-CypERC was driven primarily by large confidence gains in services and, to a lesser extent, by confidence improvements in retail trade, industry, and consumers.

The sizable increase in the Services Confidence Indicator resulted from improved assessments of past performance (business situation, demand) and significant upward revisions in demand expectations.

Nevertheless, in April, uncertainty rose substantially, suggesting that the recovery of business confidence in the services sector remains fragile.

Improvements in the Retail Trade Confidence Indicator resulted from improved assessments of past sales and upward revisions in sales expectations, despite less favourable views on the current stock levels.

The Construction Confidence Indicator declined marginally because of downward revisions in employment expectations, despite more favourable assessments of the levels of order books.

The Industry Confidence Indicator increased due to improved assessments of the current levels of order books and upward revisions in production expectations.

The Consumer Confidence Indicator rose in April, registering improvements for the third month in a row.

Consumers assessed their current financial conditions more favourably and revised their expectations about the future economic conditions in Cyprus upwards; also, they expressed stronger intentions to make major purchases over the next months.