A renewed deterioration in the business climate within the services sector contributed to a further decline in economic sentiment in Cyprus in May, with the Economic Sentiment Indicator (ESI-CypERC) dropping by 1.5 points compared to April.

According to the Economics Research Center of the University of Cyprus (CypERC), the decline was largely driven by falling assessments of current conditions in the services sector, coupled with downgraded turnover expectations for the next quarter.

The index has now reached its lowest point in the last eight months, although it remains above its long-term average of 100 points, a threshold signalling favourable overall conditions in the medium term.

In its latest monthly survey, the CypERC noted that while employment expectations improved significantly, sentiment in construction edged down. This was attributed to a weaker assessment of the present state of businesses in the sector.

By contrast, retail trade sentiment held steady in May, as weaker sales expectations were offset by improved views on current business conditions.

Manufacturing sentiment registered a modest improvement, underpinned by upgraded forecasts for production in the coming quarter.

Consumer confidence also saw a slight uptick, largely due to more optimistic views on both the recent and future financial situation of households.

Nonetheless, the survey recorded a downward revision in consumer expectations for the country’s broader economic outlook.

Meanwhile, the Economic Uncertainty Index moved lower in May, as uncertainty eased across both businesses and consumers.

According to the CypERC, business-related uncertainty declined in all sectors except construction, where it remained stable at April’s relatively low levels.

Uncertainty among low-income households also fell markedly, offering a more positive signal in terms of consumer sentiment and economic stability heading into the summer.