Confidence in Cypriot economy drops in July

Households and business owners in Cyprus are less optimistic about the economy when compared with a month ago, a report by the University of Cyprus Economics Research Centre shows.

The report shows that the Economic Sentiment Indicator (ESICypERC) decreased by 4.7 points when contrasted with June 2021.

Despite the dip in economic sentiment, the Economic Sentiment Indicator for Cyprus is still above average and is approximately 100 points higher year-on-year.

It must be noted, however, that strict restrictions were in place during the same period in 2020, severely hindering economic activity.

The decrease in economic sentiment in July is primarily a reflection of a lower confidence in the services sector of the economy, as well as the increase in daily Covid-19 cases, with the latter having a direct effect on how businesses can perform.

A higher number of cases can lead to workplace absenteeism, harm productivity, lead to worker shortages, disrupt supply chains, and cause consumers to be more cautious with their disposable income.

In terms of the services sector, the report notes how businesses have revised their forecasts for the demand of their services negatively for the next few months.

This has been the key reason for the downgrading of economic sentiment, as both the prices of their services as well as the total number of their employee base are mostly unaffected and are expected to remain stable in the near future.

Outside of the services sector, the report notes that all other sectors did not shift significantly one way or another during July.

In the retail sector, economic sentiment declined very marginally, mostly because sales from the previous quarter experienced a slight dip.

In addition, sales and stock orders for the next few months have been revised downwards.

Retail employee numbers remain essentially unaffected from June, while retail goods prices have been revised upwards.

In the construction industry, economic sentiment experienced a slight increase. While the sector was negatively impacted by lower business activity, confidence in the sector was buoyed by improved employee number expectations when contrasted to the previous quarter, as well as from the upwards revision of construction project prices in the coming months.

The capacity utilisation index, meaning the degree to which a company or country employs its installed productive capacity to create products (not applicable to service), remained at 49 per cent for July. Comparatively, this is the same rate as in April and January of this year.