Cyprus economic climate improves in November 2023

Cyprus experienced an upturn in its economic climate in November 2023, compared to October, primarily attributed to the service and construction sectors, according to a study conducted by the University of Cyprus’ Economic Research Centre (CypERC) in collaboration with RAI Consultants Ltd.

The Economic Sentiment Indicator (ESI) of the CypERC increased by 2.6 units compared to October, while the Economic Uncertainty Indicator continued its decline in November due to reduced uncertainty among service sector businesses.

However, uncertainty increased among businesses in other sectors, particularly in retail trade. Consumer uncertainty showed a slight increase.

Specifically highlighted by the CypERC, the service sector’s improved climate resulted from significant enhancements in current situation evaluations (business financial status, turnover), rather than strengthened expectations for demand.

Meanwhile, the boost in the construction sector’s climate stemmed from improved evaluations of ongoing projects and more positive estimations of the workforce for the next quarter.

In retail trade, the business climate remained unchanged from October levels as the improved current situation (recent sales, current stocks) was counterbalanced by deteriorating expectations for sales in the next quarter.

Businesses revised downward both their expectations for next quarter sales and estimates for orders to suppliers, while expectations for selling prices continued a downward trend for the third consecutive month.

In manufacturing, the climate weakened due to more negative evaluations of current orders and more pessimistic estimations for future production.

Compared to October, businesses assessed their recent production and current orders (including export orders) more negatively, while responses regarding current levels of final product stocks did not significantly change from the previous month.

Additionally, expectations for next quarter’s production were more pessimistic in November compared to October.

Moreover, consumer sentiment marginally improved in November, as consumers’ outlook on the future economic status of their households and the country was slightly less negative compared to the previous month.

However, consumer assessments of their recent household economic situation were less favourable compared to October, and their intentions to spend on major purchases weakened.

Consumers significantly revised their expectations downward for price developments, possibly due to the implementation of fiscal measures to curb inflation.

Additionally, consumers in November appeared less pessimistic than in October about future labour market conditions, although a significant proportion still anticipated rising unemployment.

Finally, consumer assessments of price developments over the last 12 months reflected some easing of upward pressures for the second consecutive month.