Business and consumer confidence improves

Business and consumer confidence surveys conducted in the third quarter showed a net improvement although
on balance the replies still showed a predominance of negative sentiment, the Central Bank said today.
Industrial confidence had also continued to improve.

It said that the seasonally-adjusted industrial confidence indicator added 10 percentage points over the quarter,
mainly reflecting a recovery in order books from the low level reached in June and a drawdown of stocks of
finished goods.

At the same time, production expectations declined marginally, with respondents pointing to weak demand as the
main factor.

A breakdown by main industrial groupings shows that the sentiment indicator for producers of consumer goods gained 14 points over the quarter, with this sector remaining the most optimistic. But sentiment also improved in the intermediate goods sector, where it was boosted by higher order-book levels, while there was a slight improvement among producers of investment goods, in line with more optimistic production expectations.

Non-seasonally adjusted survey results for the construction industry showed a significant improvement during the quarter.

Following a slight deterioration in July, the overall sentiment index improved in August and September. The net gain of 35 points over the quarter reflected positive employment expectations for the fourth quarter
along with higher order books.

Sentiment among service providers improved in July and August, even breaking into positive territory in the latter month, before turning negative again in September.

On a net basis, the seasonally-unadjusted indicator added seven percentage points over the quarter. The
fall in confidence in September was mainly due to expectations of a drop in demand in the following quarter.

The Central Bank said that supplementary indicators also showed pessimism with respect to employment expectations, while a tightening of cash flow positions was indicated as the main constraint.

CONSUMER CONFIDENCE IMPROVES, BUT STILL NEGATIVE

Consumer sentiment deteriorated in July but then improved in August. This notwithstanding, it remained in negative territory throughout the quarter.

The August Improvement was broadly based, Reflecting more positive expectations about the general economic
outlook, the respondents’ financial situation and, above all, improved labour market prospects.

Supplementary indicators showed a slight reduction in planned spending on major items such as new cars, home improvements, furniture and electronic devices.

At the same time, respondents’ perceptions regarding consumer prices suggested a slight decline in expected inflation.