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Cyprus economic sentiment weak, services strong, and employment expected steady

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ECONOMIC sentiment weakened in Cyprus in January, yet businesses expect to keep employment stable, according to a survey by the Economic Research Centre at the University of Cyprus.
“In January 2021, the economic climate deteriorated, with the Economic Situation Index (DOS) decreasing by 5.2 points compared with December 2020.”
Consumer expectations for household spending and the economic climate have declined sharply, according to the survey.
Expectations for employment levels in the next quarter have remained unchanged at November levels – significant changes in employment are not expected, despite conditions.
Business expectations for the number of their employees and sales prices fluctuated around the slightly negative levels of December, according to the Economic Conjuncture Survey, which aims to capture the perceptions of entrepreneurs and consumers about the current economic situation and their expectations for the future.
Overall, sentiment definitely took a negative turn, according to the survey in January from December (findings are index-based).
“Their evaluations of the ongoing projects were more negative compared with December, and estimates for employment in the next quarter were down, but only slightly. On the other hand, the expectations of business for sales prices were revised upwards, but remained marginally negative,” the survey indicated.
Services activity, which is the largest component of GDP in Cyprus, remained steady despite the difficult conditions.
In the service sector, activity “deteriorated marginally,” according to the survey, with the index of production capacity in services down to 79 per cent from 80 per cent in October 2020.
It is interesting to note that the marginal deterioration recorded in the overall index of services in January, is mainly linked with the big drop in productive use capacity in the hotels and restaurants industry, due to pandemic control measures that affected the industry from November 2020 onwards. What this means is that, outside the hard-hit tourism sector, Cyprus services have maintained a strong level of activity.
In manufacturing, the business climate declined due to the perceived deterioration of the current context – the pandemic and lockdown hurting expectations.
Expectations for exports were more negative, the survey warned. Inventories are currently increasing, and that has also hit sentiment as there is concern about making sales. Not surprisingly, expectations of companies for production in the next quarter were revised downwards as inventories are well-stocked.
In retail there were expectations of improvements in future sales, no doubt due to the hope of an end to lockdown restrictions.
Expectations for construction deteriorated due to more negative forecasts for ongoing projects. In construction, employment is expected to decline.
Obviously, lockdown has contributed sharply to the decline in sentiment, and the relaxation of measures in February may mark a change in feeling.
There is talk among economists of a consumption boom like the one that followed the end of the flu epidemic at the turn of the 19th century, early 20th century. The 1920s were referred to as the ‘roaring twenties’ for this reason – some predict a similar ‘roaring boom’ here.

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