Economic sentiment climbs to 15-month high

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Cyprus’ economic sentiment in May reached its highest point since the pandemic in 2020, reflecting the improvement in business confidence as activity gradually returned to normal.

The Economic Sentiment Indicator (ESI), compiled by the University of Cyprus’ Economic Research Centre, rose by 7.6 units in May from the previous month, reaching 104.1 units.

The ESI returned above the long-term average of 100 units since March 2020, when the COVID-19 pandemic hit Cyprus.

Indicators have been moving upward since March 2021, reflecting the favourable conditions for economic activity in the coming quarters.

The increase in the ESI was driven by improvements in business confidence in all sectors.

According to economists, the Services Confidence Indicator increased strongly for the third consecutive month in May due to improved assessments of past performance (business situation and demand) and significant upward revisions in demand expectations.

The rise in the Retail Trade Confidence Indicator was due to more favourable views on the current stock levels and upward revisions in sales expectations.

Furthermore, improvement in the Construction Confidence Indicator was driven by more favourable assessments of the levels of order books and upward revisions in employment expectations.

The rise in the industry confidence indicator was driven by more favourable views on the current levels of order books, stocks of finished products and upward revisions in production expectations.

However, consumer confidence remained unchanged, components (such as assessments of current and future household financial conditions, expectations about the economy, intentions to make major purchases) remained roughly unchanged in May.