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May economic sentiment improves

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Economic sentiment in Cyprus improved slightly in May, with the monthly Economic Sentiment Indicator (ESI-CypERC) up by 1.1 points from April due to stronger business confidence in services.

However, at 106.1 points, the ESI-CypERC index compiled by the University of Cyprus Economic Research Centre is still far short of the 111.5 in February.

This was before the Russian invasion of Ukraine and the impact it had on markets around the world, with rising commodity and fuel prices, while Cyprus lost an estimated 850,000 tourist arrivals expected this year.

On a positive note, the ESI-CypERC for May was boosted by an increase in the Services Confidence Indicator, driven by further improvements in past performance assessments (business situation and demand) and upward revisions in demand expectations.

In May, economic uncertainty declined in services, construction and retail trade, while it rose among firms in industry and households.

Firms’ selling price expectations and consumers’ price expectations remained at extremely high levels, indicating the continuation of upward price pressures.

The Retail Trade Confidence Indicator was unchanged as the improved assessments of recent sales, and current stock levels were offset by a deterioration in sales expectations.

The Construction Confidence Indicator stayed unchanged as assessments of the level of order books and employment expectations were broadly stable.

The decrease in the Industry Confidence Indicator was driven by a deterioration in the assessments of current levels of order books and pessimistic views on future production.

Finally, the Consumer Confidence Indicator decreased, mainly because of downward revisions in consumers’ expectations about their financial conditions and the general economic situation in the country.