Economic sentiment in March dropped to a level below that of May last year, due to rising uncertainty among consumers and companies over the war in Ukraine, according to a University of Cyprus survey.
The monthly Economic Sentiment Indicator (ESI-CypERC), compiled by the university’s Economics Research Centre, said that despite recovery efforts from Covid during the past year, the March index dropped by 9.4 points from February to 102.1, just below the May 2021 level of 103.9.
“In March, the sharp deterioration of economic sentiment and the rise in uncertainty among firms and consumers were driven by external developments, namely Russia’s invasion of Ukraine, the sanctions imposed on Russia and the rising international commodity prices,” said the UCy survey.
“These negative developments in March resulted in large downward revisions in expectations about future activity and upward revisions in price expectations,” with weaker business confidence in services, industry and retail trade, and confidence losses among consumers.
By sector, the monthly survey said the decrease in the Services Confidence Indicator resulted from “a deterioration in the assessments of past performance (business situation and demand), and from downward revisions in demand expectations.”
The decline in the Retail Trade Confidence Indicator stemmed from less favourable views on recent sales and downward revisions in sales expectations.
The Construction Confidence Indicator remained unchanged as the assessments of the level of order books and employment expectations stayed broadly stable.
The dip in the Industry Confidence Indicator was driven by less favourable views on the current level of order books and stocks of finished products and more pessimistic production expectations.
Finally, the decline in the Consumer Confidence Indicator resulted from a deterioration in all of its components.
The UCy survey said that in March, “consumers assessed their recent financial conditions less favourably, and revised their expectations about their financial conditions and the economic conditions in Cyprus downwards.
“Moreover, consumers’ intentions to make major purchases weakened in March.”