In the third quarter of 2014 confidence improved strongly among operators in the manufacturing sector and, to some extent, also among service providers.

In contrast, a loss in confidence was reported in the construction sector and among consumers.

This was reported by the Central Bank in the latest edition of the Quarterly Review.

Largely reflecting developments in the manufacturing sector, the economic sentiment indicator rose to 118.0 in September from 109.8 in June and thus remained above its longterm average of 100.7.

Industrial confidence rises sharply

After rising to -2 in July from -7 in June, the industrial confidence indicator moved into positive territory in August and by September rose further to 15. Thus, the indicator approached the most recent peak recorded in 2008 while moving above its long-term average of -5.

Between June and September, all sub-components forming part of the industrial confidence indicator reported gains. More specifically, production expectations improved as the share of respondents expecting a rise in production over the subsequent three months increased. This was largely a result of developments among producers of computer, electronic & optical products, beverages and food products.

Moreover, on balance, a smaller number of firms reported weak order book levels. As a result of these movements, the production expectations and order book sub-indicators moved above their respective long-term average.

During the third quarter, respondents on balance reported that their stock of finished goods would decrease by a larger amount compared with three months earlier.

 This subindicator remained below its long-run average, suggesting that the accumulation of stocks continued to lose momentum.

In line with the rise in confidence, further information indicates that the number of respondents anticipating an increase in their labour complement increased compared with three months earlier. Meanwhile, the share of participants anticipating their selling prices to decrease rose, largely reflecting a weaker competitive position in external markets.

From a sectoral perspective, between June and September, confidence improved among manufacturers of food and metal products. Confidence turned positive in the pharmaceutical, beverage, non-metallic mineral product and computer, electronic & optical product sub-sectors. On the other hand, confidence fell in the sectors encompassing printing & reproduction of recorded media and wearing apparel.

Confidence in the construction sector deteriorates slightly

In the construction sector, confidence fell marginally from -19 in June to -21 in September. Nonetheless, the indicator remained above its long-term average of -31.

The loss in confidence during this period was a result of respondents' assessment with regard to their current order book levels. Compared with June, more firms reported these to be below normal. In contrast, while in June the majority of respondents foresaw a decline in their labour complement, in September they expressed the intention of marginally increasing their workforce.

Confidence rises slightly in the services

The services confidence indicator reported a minimal gain, rising to 24 in September from 23 in June. It thus remained above its long-term average of 20.

The assessment of demand for the previous three months and of the current business situation deteriorated. On balance, however, a higher share of respondents expected an increase in demand over the subsequent three months. Better expectations of future demand were evident in the sectors comprising land transport, catering, rental & leasing, financial services and gaming.

 All sub-indicators stood above their respective long-term average.

Supplementary data show that expectations with respect to employment improved. On balance, prices charged by service providers were anticipated to decrease in the subsequent three months. Selling price expectations deteriorated mostly in air transport, programming & broadcasting, and the catering sectors

Consumer confidence moves again into negative territory

During the third quarter of 2014, consumer confidence deteriorated and moved again into negative territory in August and September.

The indicator stood at -3 in September as against 1 in June, remaining nonetheless well above its long-term average of -24.

This small deterioration was driven by consumers' assessments with regard to their financial situation in the forthcoming 12 months. In addition, consumers were also less confident about the general economic situation. In fact, consumers were more pessimistic about their ability to save in the following 12-month period, but additional information from the survey suggests that they were more predisposed to make major purchases of consumer goods, such as furniture and electronic devices. On the other hand, views about unemployment were marginally more pessimistic in September compared with June. The unemployment sub-indicator, however, remained below its long-run average, indicating that consumers' assessment of employment prospects were more positive than in the past. At the same time, the sub-indicators related to savings, the financial position and the economic situation were higher compared with their respective long-term averages.

Additional results on price developments show that in September, on balance, a smaller number of respondents expected prices to fall over the subsequent 12 months compared with three months earlier.