Business sentiment improves

Business sentiment improved in the last quarter of 2009, with operators in the manufacturing sector and service providers reporting improved business prospects, the Central Bank said today.

Firms in the construction industry were more pessimistic.

The Central Bank said that the consumer confidence index remained in negative territory but was generally stable.

The seasonally adjusted confidence indicator added 14 percentage points over the quarter, climbing to -2 in December.

On balance, respondents reported higher order books while stocks of finished goods were described as adequate. Expectations about production levels for the following months remained positive and above those recorded in the previous quarter. This notwithstanding, opinions with respect to employment opportunities remained pessimistic.

Confidence improved most strongly in the intermediate goods category, with the index for the latter turning positive in December for the first time since September 2008. Sentiment among manufacturers of investment goods also improved compared with the previous quarter as production expectations turned positive. Meanwhile, confidence among producers of consumer goods worsened in December, mainly as a result of a deterioration in expected production levels.

As in previous quarters, sentiment among construction firms was quite volatile in the December quarter, which, the Central Bank said, may reflect a relatively small sample size. In fact, after a sharp deterioration in November, the construction industry’s confidence level rebounded in December to close the quarter 7 percentage points below the September level.

Similarly, the sector’s order book levels and employment expectations worsened in November but recovered in December, though both components remained in negative territory. Operators’ views on the causes of the volatility tended to diverge, with a large number reporting that there were no current factors limiting their activity, while others pointed to weak demand as the major limiting factor.

Over the last three months of 2009, sentiment among service providers moved erratically before ending the year on a positive note. A balance of respondents referred to an improvement in the current business situation and in expected demand for the following quarter. Nevertheless, supplementary information provided by respondents showed that there was a reduced level of pessimism among service providers concerning employment expectations, while financial considerations were indicated as the main factor limiting their business activity. Respondents in the tourism sector reported a deterioration in their business situation in the recent past while they expected their business conditions to improve in 2010.