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Business climate deteriorates

26/03/2010 15:08
The business climate in Cyprus deteriorated further in March, boosting forecasts for worse days to come. The sector of services, on which economy bets for recovery, shrunk significantly for the first time in the past few months.

At the same time, the consumers’ expectations hit a record low last seen in April 2009. Constructions deteriorated too, while the retail trade and the manufacture showed an improvement but they are still in the red.

According to the latest Economic Research Unit of the University of Cyprus, the economic conjuncture index fell by 6.1 points to 62.2 points in March from 68.3 points in February, hitting a 5-month high.

The deterioration of the index is attributable to the sharp and unexpected deterioration of the climate in the service sector.

The difference between the positive and the negative answers in the servicer sector stood at -17 from -8 in February. The business climate worsened due to the deterioration of the current condition and the expectations. Compared to the previous month, most businesses evaluated negatively their economic condition, the demand for their services and the prospects for demand in the next three months.

Also, most businesses expect a drop in the sale prices in the next few months. Despite the negative climate in the sector, fewer declare a decline in employment in the past three months and fewer expect a decline in employment in the next few months.

The climate among the consumers worsened too.

Compared to the previous month, their estimate for the anticipated economic condition of the household in the next 12 months and the general economic condition in Cyprus deteriorated. More consumers observed big price hikes in the consumer goods in the past 12 months and much more expect big hikes in the next 12 months. The difference between the positive and negative answers stood at -40 from -38 in February, hitting a year low.

The climate has deteriorated in the sector of constructions too.

In March, fewer and fewer businesses declared satisfied by the current overall order books and more expect a drop in the sale prices in the near future. The businesses’ estimate for the employment prospects in the sector in the next few months remained at the same level.

At the same time, however, fewer companies evaluated negatively the construction activity in the past three months. The difference between the positive and the negative answers in the sector reached -43 from -39 in February.

In manufacturing, the business climate improved due to the improvement of the current conditions and the expectations. The difference between the positive and negative answers stood at -9 from -12.

In retail trade, the business climate improved. The companies’ sales recorded an improvement in the past three months, as their expectations for sales in the next few months did.

Fewer businesses expect a decline in orders to the suppliers and in employment in the next three months. Their current stock and their expectations for the sale prices in the next three months remained almost the same as in the previous month. The difference between the positive and negative answers stood at -16 from -24.

The research program is coordinated by the Economic Research Unit and is financed by the European Union and the Finance Ministry. The data are collected by RAI Consultants Public Ltd.