During the fourth quarter of 2017, the economic sentiment indicator  rose further to 120, from 114 in the preceding quarter, thus remaining above its long-term average of 100, the economic sentiment surveys published by the Central Bank's Quarterly Review said. Sentiment improved within all sectors, with the most pronounced increase registered within the retail sector.

Confidence in the retail sector increases significantly

 Sentiment in the retail sector rose to 21, from 8 in the third quarter of 2017. Hence, sentiment among retailers stood substantially above its longterm average of 2.

The rise in confidence was driven by all subcomponents, with both business activity expectations and assessment of past activity rising sharply. At the same time, compared with the third quarter, a marginally smaller share of respondents assessed stock levels to be above normal.

Additional survey data indicate that on balance, more firms expected employment to rise during the three months ahead, while firms expected selling prices to fall.

Confidence in the construction sector reaches an all-time high

Sentiment in the construction sector increased significantly during the fourth quarter of 2017. The indicator reached 27, thus standing at the highest level recorded since survey results for Malta became available.

The rise in confidence during the fourth quarter of 2017 was largely underpinned by firms' assessment of order books, although employment expectations also improved slightly.

Additional survey data indicate that in the fourth quarter of 2017, more respondents, on balance, reported positive developments in building activity during the preceding three months. Overall the survey suggests that the construction sector has been increasingly meeting rising activity through higher utilisation of labour. Indeed, labour shortages remained the main factor limiting production in this sector, with this constraint mentioned more frequently at the turn of the year. Meanwhile, a higher net percentage of firms expected selling prices to rise in the subsequent three months.

Consumer confidence edges up to a new record high

The consumer confidence indicator rose to 17 in the fourth quarter of 2017, from 8 in the preceding three-month period, with all of the indicator's components posting the highest reading since the survey has been conducted in Malta.

All components contributed to the increase in consumer sentiment during the fourth quarter. However, almost three-fourths of the improvement recorded in this quarter can be attributed to higher savings expectations and a further reduction in the outlook for unemployment for the year ahead.10 Additional survey data suggest that the share of consumers intending to reduce major purchases over the subsequent 12 months increased. At the same time, on balance, a smaller share of consumers expected inflation to rise in the 12 months ahead.

Industrial confidence improves

Confidence in the industrial sector rose to 11 in the fourth quarter of 2017, from 5 in the preceding quarter, thus rising further above its long-term average of -4. The rise in industrial sentiment during the quarter under review was driven by both firms' production expectations and their assessment of order books, although a net share of respondents continued to assess order books to be below normal for the season. On the other hand, fewer respondents assessed stocks of finished goods to be below normal in the fourth quarter.

Meanwhile, more respondents expected to increase their labour complement in the subsequent three months. At the same time, on balance, marginally fewer respondents expected to decrease their selling prices.

Confidence in the services sector rises further above average

In the fourth quarter of 2017, the confidence indicator in services reached 36, up from 33 in the preceding quarter. Consequently, it rose further above its long-term average of 22. All sub-components contributed to the recent rise in the services confidence indicator

Additional survey data indicate that a smaller net share of respondents reported an increase in employment in the preceding three months. However, a higher net share of respondents reported improving employment expectations for the following three months. Also, a larger net share of respondents indicated that they expected prices to increase in the three months ahead.