Economic sentiment drops sharply, weaker confidence in all fields reported

The Cyprus Economic Sentiment Indicator (ESI-CypERC) recorded a steep drop in March affected by weaker confidence in light of the war in Ukraine.

The (ESI-CypERC) compiled by the University of Cyprus’ Economic Research Centre (ERC) dropped by 9.4 points to 102.1 in March from 115.1 the previous month.

“In March, the sharp deterioration of economic sentiment and the rise in uncertainty among firms and consumers were driven by external developments, namely Russia’s invasion of Ukraine, the sanctions imposed on Russia and the rising international commodity prices,” the ERC said, adding that these negative developments in March “resulted in large downward revisions in expectations about future activity and upward revisions in price expectations.”

According to the ERC the decrease in the ESI-CypERC resulted from weaker business confidence in services, industry and retail trade, as well as from confidence losses among consumers.

The decrease in the Services Confidence Indicator was a result of a deterioration in the assessments of past performance (business situation and demand), as well as of downward revisions in demand expectations, the ERC added.

The deterioration in the Retail Trade Confidence Indicator stemmed from less favourable views on recent sales and downward revisions in sales expectations, while the Construction Confidence Indicator remained unchanged as the assessments of the level of order books and employment expectations stayed broadly stable.

In the Industry Confidence Indicator, the decline was driven by less favourable views on the current level of order books and stocks of finished products, and more pessimistic production expectations.

Furthermore, the decline in the Consumer Confidence Indicator resulted from a deterioration in all of its components. In March, consumers assessed their recent financial conditions less favourably, and revised their expectations about their financial conditions and the economic conditions in Cyprus downwards.

Moreover, the ERC noted that the consumers’ intentions to make major purchases weakened in March.