The Cyprus Composite Leading Economic Index (CCLEI) recorded a 0.43 per cent year-on-year decline in July 2026, according to the latest revised data from the Economics Research Centre of the University of Cyprus (CypERC).

The smaller annual decline suggests that the downward trend in the index is gradually easing, although CypERC said the Cypriot economy continues to face short-term challenges from heightened external and geopolitical pressures.

The CCLEI is designed to provide early warning signals of turning points in the Cypriot business cycle, with its constituent indicators generally changing ahead of overall economic activity.

CypERC regularly assesses a range of domestic and international leading indicators to produce the index, which is intended to provide an indication of where economic activity may be heading before changes become evident in broader economic data.

The index comprises the Brent crude oil price, the Economic Sentiment Indicator (ESI) for Cyprus and the euro area, and total property sales contracts.

It also includes tourist arrivals, the value of Cypriot credit card transactions, the retail trade sales turnover volume index, and a temperature-adjusted volume index of electricity production.

The July reading was shaped by contrasting movements among these components.

The weighted Economic Sentiment Indicator deteriorated compared with July 2025, mainly reflecting a weaker economic climate across all sectors of the Cypriot economy on an annual comparison.

Brent crude oil prices also recorded a year-on-year increase, while tourist arrivals remained below their level of a year earlier.

These negative factors were partly offset by stronger performances in several domestic indicators.

Property sales contracts, retail trade and electricity production all made positive contributions to the CCLEI’s annual growth rate, helping to limit the overall decline.

CypERC also highlighted Cypriot credit card transactions among the domestic components providing support to the index, alongside property sales, retail activity and electricity production.

The latest CCLEI reading comes against a more mixed picture in CypERC’s wider assessment of economic sentiment in Cyprus.

The centre’s latest business and consumer surveys showed that economic sentiment improved in July, with the ESI-CypERC rising by 0.7 points from June and extending the positive trend recorded in recent months.

The improvement was driven primarily by stronger confidence among businesses in the services and retail trade sectors, although this was partly offset by weaker sentiment in construction and industry.

The Services Confidence Indicator increased mainly because businesses became more optimistic about their expected turnover in the coming months.

Retail trade confidence also rose for a second consecutive month, reflecting more favourable assessments of current stock levels and stronger expectations for future sales.

Construction confidence, by contrast, edged down marginally as firms reported less favourable assessments of their current overall order books.

Industrial confidence also weakened during July, with CypERC attributing the decline largely to less favourable assessments of finished product stocks and lower expectations for future production.

Consumers were less optimistic than businesses, with the Consumer Confidence Indicator falling during the month.

The decline was mainly linked to households taking a more negative view of their financial position.

Consumers reported a further deterioration in their assessment of their recent financial circumstances, while their expectations for their future financial situation also weakened in July.

At the same time, overall economic uncertainty in Cyprus declined.

CypERC attributed this reduction to lower uncertainty among businesses in the services, retail trade and construction sectors.

Consumer uncertainty, however, increased for a second consecutive month.

Low-income households recorded the largest increase in uncertainty about their future financial situation compared with other income groups, according to the survey.

The contrasting movements in sentiment help explain why the annual decline in the CCLEI remained negative despite improvements in several domestic indicators.

The index is intended to capture changes in a broad range of factors that can precede movements in economic activity, meaning individual components can move in different directions at any given time.

CypERC said the milder year-on-year decline in July indicates that the negative trend is easing, although this does not remove the short-term pressures facing the economy.

The centre pointed specifically to the positive contribution from property sales contracts, credit card transactions, retail trade and temperature-adjusted electricity production as a counterweight to the downward pressure from other components.

The latest data also follow CypERC’s updated economic projections, which pointed to slower growth and higher inflation in 2026 as the continuing conflict in the Middle East weighs on the Cypriot economy.

CypERC expects real gross domestic product (GDP) growth to slow from an estimated 3.8 per cent in 2025 to 2.7 per cent in 2026, before strengthening to 3.1 per cent in 2027.

Inflation, meanwhile, is forecast to accelerate sharply from 0.1 per cent in 2025 to 3 per cent in 2026, before easing to 2.1 per cent in 2027.

The centre said the weaker outlook reflected slower economic activity in both Cyprus and the euro area, rising energy prices, tighter financing conditions and the continuing economic effects of instability in the Middle East.

Despite these pressures, CypERC expects the Cypriot economy to remain relatively resilient.

It pointed to low unemployment, sound public finances and increased demand for new housing loans as factors supporting economic activity.

The latest CCLEI figures therefore present a mixed picture, with the annual decline continuing but becoming less pronounced, while several domestic indicators are providing support.

At the same time, weaker tourism, higher oil prices and the deterioration in the annual economic sentiment component continue to weigh on the index.

The combination suggests that while the Cypriot economy is facing a less favourable external environment, domestic activity continues to provide some protection against a sharper deterioration.