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Economic sentiment deteriorates

27/05/2015 09:58
The economic sentiment in Cyprus deteriorated in May, according to new figures by the University of Cyprus’ Economic Research Centre (ERC).

The fall is due to a deterioration of the business sentiment in all sectors and mainly due to more pessimistic assessments of the business activity for the next quarter.

In April the economic sentiment climbed to the highest level since September 2008 due to expectations of a better course for the Cypriot economy within the next twelve months and estimates for a decrease in unemployment.

According to the report, the economic climate fell in the fifth month of the year by 3.5 points with the economic conditions index (ECI) reaching 104.2 points from 107.7 points in April.

According to the ERC, despite the reduction, the index remains still on quite high levels and over its long-term average.

The decline in May compared with last month, is due to the deterioration of the economic climate in services, manufacturing and to a lesser extent in the construction and retail trade sector.

In the services sector the business climate deteriorated due to the worsening of the current situation and expectations. Compared to April, fewer businesses evaluated positively the economic situation and demand of their business in the last quarter while at the same time fewer expect an increase in their demand for the next quarter. Businesses’ evaluations on employment in the last three months remained at the same level as in April, while their expectations for employment over the next quarter were more pessimistic than last month. Compared with April, fewer companies are planning price cuts within the next three months.

In manufacturing, business sentiment deteriorated due to worsening of the current situation and expectations.

In the construction sector, the business climate deteriorated due to worsening of expectations. Compared to April, the ratings for the construction activity of companies in the last quarter, was more negative. In May, business evaluations for ongoing projects (current overall order books) remained in a negative territory, as in April. More companies than last month are planning to reduce their staff and their selling prices in the next quarter.

In retail trade, business sentiment deteriorated due to worsening of the current situation and expectations.

The sentiment among consumers improved in May compared with April. Their assessments of the economic situation of Cyprus and their households, during the last and the next 12 months were less negative compared to April. Their estimates for unemployment declined significantly compared to last month, however a large part of them still expects a further increase in the number of unemployed people.

Compared to April, more consumers noticed an increase in prices of consumer goods in recent months, while fewer expect that prices will remain stable or decrease in the next 12 months.

The majority of consumers are still cautious in relation to major purchases in the next 12 months while they also have a negative attitude towards saving. Finally, the responses of consumers describing the current economic situation of households remained unchanged in May, as the majority says that they barely manage to make ends meet with their income.