In May 2017, the Economic Sentiment Indicator (ESI) stood at 113, down from 115 in the preceding month, remaining above its long-term average of 100.2, the Central Bank of Malta reported today.

Lower sentiment was registered among firms operating in the services sector, while confidence improved in construction and industry. Confidence among consumers and retailers remained unchanged from the preceding month.

In May, the confidence indicator in the services sector fell to 25, from 34 in the preceding month. Despite this fall, sentiment remained above the long-term average of 21.

The recent decline in sentiment was driven by all sub-components. Additional survey data indicate that, overall, both firms’ employment and price expectations for the three months ahead were less optimistic compared with April. Similarly, respondents’ assessment of past labour developments deteriorated when compared with April, though to a lesser extent.

In contrast, confidence in the construction sector increased to 13, from 6 a month earlier, thus rising further above its long-term average of -22.5.

A weaker assessment of the general economic situation and unemployment expectations were counterbalanced by consumers’ improved saving expectations and assessment of their financial situation

This increase in confidence mainly reflected higher employment expectations for the three months ahead. Other survey data for the month indicate that, compared with April, broadly the same share of respondents reported an increase in building activity over the preceding three months. However, a marginally smaller share of firms expected their selling prices over the following three months to rise.

The industrial confidence indicator also improved, rising from 5 in April to 8 in May. Therefore, it remained well above its long-term average of -4.6.

Improved order books and stronger production expectations were the contributors behind the improvement in sentiment, while stocks of finished goods were unchanged and slightly above normal. Supplementary survey data suggest that, on balance, a smaller share of respondents expected to increase their employment in the subsequent months. At the same time, more respondents expect to lower their selling prices in the following three months.

Consumer confidence was unchanged from the previous two months, at 3.7. Consumer confidence thus still remained well above its long-term average of -20. A weaker assessment of the general economic situation and unemployment expectations were counterbalanced by consumers’ improved saving expectations and assessment of their financial situation.

Additional survey information indicates that in May consumers’ inflation expectations weakened marginally compared with the preceding month. At the same time, a smaller share of respondents expected to make less major purchases over the subsequent 12 months.

Similarly, sentiment in the retail sector was unchanged at -2, after turning negative in the preceding month. Thus, it remains below its long-term average of 1. While respondents’ expectations for business activity deteriorated, their assessment of past business activity improved. At the same time, a smaller share of respondents assessed their stock level to be above normal. Additional survey data for this sector indicate that, respondents expected both their orders and labour complement to fall in the subsequent three months. On balance, however, firms expected prices to rise in the following three months.