The surveys carried out by or on behalf of the Central Bank show a general deterioration of sentiment offset by a rising confidence among consumers.

The surveys were reported in the latest issue of the Central Bank’s Quarterly Review.

The following is the Central Bank’s report.

Survey data for the third quarter of 2013 indicate a deterioration in confidence among firms operating in the manufacturing and service sectors. In contrast, confidence improved among consumers, while it remained unchanged at very low levels in the construction sector.

As a result of these developments, the overall economic sentiment indicator (ESI), which summarises developments in all these sectors, fell to 104.1 in September from 105.2 in June. The indicator nonetheless remained above its long-term average of 100.3.

Industrial confidence falls further

In the third quarter of the year, the industrial confidence indicator continued to fall and stood at -8 in September compared with -6 in June. Thus, the indicator stood below its long-term average of -6.

The decline in confidence was once again primarily driven by a deterioration in production expectations, as in September the majority of respondents anticipated production to remain broadly unchanged over the subsequent three months, whereas in June the majority expected production to increase.

Moreover, a slightly larger number of respondents reported weak order books compared with what they would expect for the same period of the year. On the other hand, on balance, respondents in September believed that their stocks of finished goods would decrease marginally, whereas three months earlier they were foreseeing a rise.

In September production expectations and the stock of finished goods sub-indicators were below their respective long-term average, while the order book indicator was equal to its long-term average.

Meanwhile, the share of respondents foreseeing a decrease in their selling prices over the subsequent three months increased. A large number of respondents continued to indicate insufficient demand as the main element inhibiting business activity.

Despite the fall in industrial sentiment generally, additional survey data indicate that in September the number of participants anticipating their labour complement to increase rose further, compared with three months earlier.

At a sectoral level, the balance of replies turned negative among producers of computer, electronic & optical products, rubber & plastic products and electrical equipment.

On the other hand, improvements in confidence were reported in sectors involved in the production of food products, pharmaceuticals, fabricated metal products (except machinery & equipment). Confidence also rose among those engaged in the printing & reproduction of recorded media and repair & installation of machinery & equipment.

Construction confidence remains unchanged

Confidence among construction firms remained unchanged, at -42 in September compared with three months earlier (see Chart 3). Thus, the indicator remained below its long-run average of -32.

The proportion of firms that considered their current order books to be below normal decreased slightly. However, this improvement was completely offset by a higher share of respondents expressing an intention to reduce their workforce in the subsequent three months. Both sub-components remained below their respective long-term average.

Confidence in the services sector deteriorates

The strong improvement in confidence among service providers observed in the second quarter of 2013 proved to be short lived as the indicator fell to 13 in September from the recent high level of 21 registered in June.

As a result, the indicator moved again below its long-term average of 19. All sub-components of the indicator deteriorated.

More specifically, respondents’ assessment with regard to demand in the previous quarter deteriorated, as did their expectations of future demand.

Meanwhile, the share of respondents registering better business conditions over the previous three months fell. As a result of these movements, all components of the indicator stood below their respective long-term averages.

Additional data show that even though overall confidence decreased, expectations with respect to employment levels improved.

While in June firms, on balance, had anticipated a fall in their labour complement, in September they expected employment to rise. On balance, a smaller proportion of participants anticipated an increase in prices charged for services compared with three months earlier.

Between June and September, confidence fell in sectors comprising accommodation, financial services, land and air transport, and food & beverage. On the other hand, improved confidence was registered in sectors related to programming & broadcasting, arts, entertainment & recreation and rental & leasing.

Consumer confidence rises

During the third quarter of 2013, the consumer confidence indicator reported gains and stood at -6 in September as against -12 in June. Furthermore, the indicator remained above its long-run average of -26 and is at the highest level since early 2008.

All components of the indicator recorded gains. In fact, respondents’ assessments of the general economic situation and their own financial position in the forthcoming 12 months improved. In September the majority of respondents expected unemployment to fall, whereas in June they had believed that the number of unemployed would increase. Moreover, consumers were less pessimistic about their ability to save in the forthcoming 12 months.

Since the beginning of the year, all components of the indicator improved, with the balance of replies regarding households’ own financial situation, the general economic situation and the outlook for unemployment turning positive.

Meanwhile, although consumers’ assessment of their ability to save improved, the balance of replies indicated that they were unlikely to save over the forthcoming 12 months.

Supplementary survey information shows that the proportion of respondents considering that the timing was right to make major purchases, given the existing economic situation, decreased slightly compared with June.

In September, on balance compared with June, a smaller number of respondents expected prices to rise over the forthcoming 12 months.