The economic climate in Cyprus recorded an improvement in December 2015, according to the Economics Research Centre of the University of Cyprus (CypERC). The Economic Sentiment Indicator for Cyprus increased in the last month of 2015 by 1.3 units, compared to November 2015.
The Economics Research Centre notes that in 2014 the Economic Sentiment Indicator was on a recovery course, while in 2015 the Indicator showed a strengthening of economic confidence in Cyprus, recording prices above the long term average throughout the year.
In December, businesses expected demand and employment over the next three months to remain at the marginally positive levels of November. The trend for prices to drop in the next three months appears to be strengthened, compared to November.
According to the Economics Research Centre, the increase of the Economic Sentiment Indicator is due to the improvement of the business climate in services and, to a smaller extent, to retail trade.
In the services sector, the business situation was better due to an improvement in the current situation and expectations. Compared to November, the responses of the businesses regarding their economic situation and the number of employees during the last quarter were more positive. Furthermore, in December a significant improvement was recorded in the expectations of businesses regarding their turnover for the next few months.
In retail trade, the business situation improved marginally due to better expectations. Compared to November, a few businesses more noticed a drop in their sales over the last quarter, while their responses on current stocks remained unchanged, i.e. at about the same levels for the season. In December, expected business activity and orders placed with suppliers for the next three months were more favourable compared to November. The expected employment for the next three months remained at the marginally negative levels of November, while the businesses` expected selling prices for the next three months recorded a drop.
In the construction sector, the business situation worsened marginally due to the deterioration of the current situation and, to a lesser extent, expectations.
In December, the assessment of businesses regarding their construction activity improved, while their responses regarding current overall order books and their expectations regarding employment over the next three months were more pessimistic than November. Furthermore, in December fewer businesses said they were planning to reduce selling prices over the next three months.
In industry, the business situation remained unchanged. In December, assessments regarding production over the past three months and current export order books were more negative than November. On the other hand, the responses for current overall order books and expectations regarding employment for the next three months recorded an improvement. Business expectations for production over the next three months remained at the positive levels of November. In December, fewer businesses said their stock finished products were lower than usual, while more said their selling prices would drop over the next three months.
The Consumer Confidence Indicator worsened in December, compared to November. The assessments of the consumers regarding the economic situation of Cyprus and households in the past twelve months were worse than November. Furthermore, their responses regarding the expected financial situation of households in the next twelve months were more pessimistic, while their estimations regarding the economic situation of Cyprus remained at the same positive levels of November.
The CypERC says that in December a larger percentage of persons asked expected an increase in unemployment over the next twelve months.
Compared to November, fewer consumers noticed stable or lower prices over the past twelve months, while, as in November, the majority expected prices to remain stable or drop over the next few months.
In December, more consumers considered the current period unsuitable for major purchases and fewer said they would make any such purchase over the next 12 months.
Even though consumer opinion regarding the suitability of the present for savings remained at the same negative levels of the previous months, in December it was less negative regarding savings over the next twelve months.
The CypERC concludes that the Economic Sentiment Indicator for Cyprus in December 2015 recorded an increase compared to November 2015. This rise is due to an improvement of the business situation in services and retail trade. The strengthening of confidence in services comes from more pessimistic responses regarding the current economic situation of businesses, and also demand over the next three months. The improvement of the climate in retail trade comes from better expectations regarding sales. The situation in construction and among consumers was slightly more negative than in November, while the climate in industry remained unchanged.