Ukraine war uncertainty hurts Cyprus’ leading economic index

The Cyprus Composite Leading Economic Index (CCLEI) turned negative in May, following annual increases in the previous months, reflecting the uncertainty driven by the war in Ukraine.

The CCLI compiled by the University of Cyprus’ Economic Research Centre (ERC) with the support of Hellenic Bank, May dropped by an annual 0.1 per cent in May 2022, reaching a level of 102.2, after a year-over-year increase of 1.6 per cent in April and 4.4 per cent in March 2022, based on recent and revised data.

“The fall of the CCLEI in May is attributed to the difficult and fluid geopolitical and economic environment due to the Russo-Ukrainian war, sanctions against Russia, and high energy costs. In particular, the international Brent Crude oil price jumped to its historically highest level in May 2022, surpassing the corresponding prices of the oil crises of the 1970s,” the ERC said.

The negative year-on-year growth rate of the CCLEI is also due to the contribution of the Economic Sentiment Indicators (ESI) in the euro area and in Cyprus, which deteriorated in May 2022, amid deteriorating business confidence, and in particular, consumer confidence.

In contrast, the growth in most of the CCLEI’s domestic components has mitigated the annual drop in the index.

Specifically, the growth rate of total property sales contracts, the value of credit card transactions, tourists’ arrivals, the temperature-adjusted volume of electricity production as well as the growth rate of retail sales volume, according to preliminary data, have accelerated.

“Although the Cypriot economy rebounded significantly after the strong shock caused by the coronavirus pandemic, the negative year-over-year growth rate of the CCLEI in May 2022 reflects the extremely uncertain geopolitical and economic environment affecting its short-term economic growth prospects, but also the short-term economic growth prospects of the global economy,” the ERC said.