Economic sentiment rises, uncertainty remains

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Cyprus’ economic sentiment improved in August from July, reflecting stronger activity in services but uncertainty remains, fuelled by the Covid pandemic.

The Economic Sentiment Indicator (ESI), compiled by the University of Cyprus’ Economic Research Centre, rose by three units in August from the previous month to 108.6 units.

“The increase in the ESI resulted from stronger business confidence in services and, to a smaller degree, from gains in retail trade and among consumers,” ERC said.

A year ago, the ESI registered only 8.38 points following a harsh national lockdown.

In August, the ESI was still above the long-term average of 100 units that it regained in April after falling into double-digits at the start of the COVID-19 pandemic in March 2020.

Despite a dip in July, indicators have been moving upward, but insecurity remains during the fourth wave of coronavirus.

According to UCY economists, the Services Confidence Indicator increased due to favourable past performance assessments (business situation and demand) and upward revisions of sales expectations.

A marginal rise in the Retail Trade Confidence Indicator was also due to improved past sales assessment despite downward expectations revision.

Downward revisions in employment expectations were offset by improved assessments of order book levels, leaving the Construction Confidence Indicator unchanged from July.

Furthermore, the Industry Confidence Indicator remained unchanged, as the downward revisions in production expectations were offset by improvements in recent performance, which resulted from more favourable assessments of stock levels.

However, Consumers expectations about their financial situation and the economic condition in Cyprus were revised upwards.

Moreover, in August, consumer intentions to make major purchases strengthened.

In any case, the economists point out that despite the rise in the overall ESI, uncertainty remains among businesses, retail trade, manufacturing, construction, and consumers.