The economic sentiment in Cyprus deteriorated in December 2023, as the Economic Sentiment Indicator (ESI-CypERC) decreased by 4.6 points compared with November 2023.

According to the Economics Research Center of the University of Cyprus (CypERC), the decrease in the ESI-CypERC was driven by weaker business confidence primarily in services and, to a lesser degree, in construction.

It notes that the decline in the Services Confidence Indicator resulted from firms’ less favourable views on their past performance (business situation and turnover), and downward revisions in demand expectations.

Furthermore, it says that the Retail Trade Confidence Indicator remained unchanged in December for the second month in a row, as the components of the indicator stayed broadly stable vis-à-vis November.

The Construction Confidence Indicator decreased, as firms assessed their current levels of order books more negatively and adjusted their employment expectations downwards, it notes.

The Industry Confidence Indicator rose marginally “due to firms’ improved views on their current levels of order books and stocks of finished products”.

In December, the Consumer Confidence Indicator rose for the second month in a row. Compared to November, “consumers assessed their current and future financial situation more favourably; moreover, consumers expressed more optimistic views on the future economic conditions in Cyprus”.

It says that in December, economic uncertainty in Cyprus rose, “mainly because of higher uncertainty among firms in services”.

According to the results of the survey, in December 2023, the indicator fell slightly below the level of December 2022, but remains above its long-term average (100 points), suggesting that economic conditions in Cyprus are still favorable, but there are challenges that increase uncertainty, especially in the largest sector of the economy, services. However, the deceleration in inflation continues, as in December 2023 business and consumer expectations for the course of prices fell well below December 2022 levels, it notes.

It says that companies in the construction sector have assessed more negatively their ongoing projects and revised down their estimates for the number of employees, resulting in a worsening of the climate in the sector. It notes that the business climate in retail trade and manufacturing did not register a “substantial change” in December, compared to November.

On the contrary, according to the survey, the consumer sentiment strengthened in December, as consumers assessed the current and future financial situation of their households and the country less negatively.

The Economics Research Center of the University of Cyprus notes that the Economic Uncertainty Index in December 2023 returned sharply to the December 2022 level, although it fluctuated at relatively low levels during 2023.

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