The Economic Sentiment Index (ESI) in Cyprus recorded a modest improvement in December 2024, rising by one point compared to November, according to the Economics Research Centre of the University of Cyprus (CypERC).
This increase was driven primarily by a significant boost in consumer confidence and, to a lesser extent, an uptick in the manufacturing sector’s business sentiment.
Consumer confidence reached its highest level in three and a half years, marking the second consecutive month of improvement.
Consumers reported a notable enhancement in their assessments of their households’ recent financial situation, coupled with the most favourable expectations for their households and the national economy seen throughout the year.
The manufacturing sector also showed signs of optimism, bolstered by improved evaluations of current orders and a positive outlook for production in the coming quarter.
However, business sentiment in construction saw a slight decline as firms revised their employment forecasts downward.
The sentiment in services and retail trade remained stable compared to November.
Economic uncertainty in Cyprus increased slightly in December but stayed relatively low overall, according to the CER.
Service and retail businesses reported greater difficulty in forecasting their economic conditions, while uncertainty among construction firms and consumers decreased significantly.
In the services sector, business sentiment remained unchanged as improved assessments of the current situation offset a decline in expectations.
Firms reported better evaluations of their recent financial conditions, with turnover remaining at positive levels.
However, they revised expectations for turnover downward in the coming quarter, and employment expectations weakened slightly.
Price expectations for the next quarter remained at a three-year low, mirroring November’s levels.
In retail trade, sentiment was also steady, as a deterioration in the current situation was balanced by more optimistic future expectations.
Businesses reported weaker sales for the last quarter and noted an increase in current inventory levels, which weighed on sentiment.
Nonetheless, expectations for future sales and supplier orders were significantly upgraded. Employment expectations, while still positive, remained modest, and price expectations showed no significant changes.
Construction activity improved in December, with businesses reporting favourable conditions for ongoing projects and the previous quarter’s activity.
However, employment expectations for the next quarter dropped sharply, and price expectations stayed near November’s relatively low levels.
The manufacturing sector benefited from better assessments of production and current orders, with forecasts for next-quarter production revised upward.
Employment expectations were steady throughout 2024, while price expectations declined after four months of consecutive increases.
Consumer sentiment stood out as a highlight, reaching a three-and-a-half-year high.
Consumers expressed optimism about their households’ and the country’s financial prospects, with December’s assessments being the most positive of the year.
They were also more hopeful about labour market conditions.
Perceptions of price trends over the past year remained consistent with the high levels of recent months, while expectations for future price increases stabilised following a sharp downward revision in November.
A notable percentage of consumers continued to anticipate price rises in the coming months.
Consumer intentions for major purchases remained at the improved levels seen in November.
Additionally, negative attitudes towards the likelihood of saving softened in December compared to earlier in the year.
