During the first quarter of 2019, the Economic Sentiment Indicator declined to 104.5, from 107.2 in the preceding quarter. Notwithstanding this fall, it remained above its long-term average of 100.1. Sentiment weakened in industry and services as well as among consumers. In contrast, it improved in the construction and retail sectors. In the first quarter of 2019, the ESI for Malta fell below that in the euro area, where it averaged 106.0.

Confidence in the services sector declines

Sentiment in the services sector edged down to 29.1 from 34.9 in the preceding quarter, but still stood above its long-term average of 23.2. The fall in confidence was mainly driven by respondents' weaker outlook for demand in the three months ahead, and, to a lesser extent, in the assessment of demand and of the business situation over the past three months.

Supplementary survey data indicate that employment expectations were less optimistic than those in the preceding quarter, while a lower net share of respondents anticipated prices to increase in the three months ahead.

Consumer confidence weakens

Although consumer confidence fell from 8.0 in the last quarter of 2018 to 3.3 in the quarter under review, it remained above its long-run average of -12.2. Consumers' expectations of major purchases over the next 12 months were the main driver behind the latest decrease. However, respondents' assessment of their past and future financial situation also weakened. Respondents were also less optimistic about the general economic situation during the next 12 months.

Additional survey data suggest that on balance, a larger share of consumers expected prices to rise. At the same time, a lower net share of respondents expected unemployment to fall in the months ahead.

Industrial confidence edges down marginally

Confidence in the industrial sector stood at -2.0 in the quarter under review, down from -0.9 in the previous three-month period, lingering marginally above its long-term average of -3.0.

During the quarter under review, production expectations, while still positive, weakened compared to the fourth quarter of 2018. At the same time, a higher share of respondents reported falling orders. Meanwhile, the assessment of stock levels improved, as fewer firms reported above normal stocks of finished goods.

Additional survey data show that on balance, a larger share of respondents anticipated an increase in employment. Meanwhile, selling price expectations turned positive.

Confidence in construction rebounds

In the first quarter of 2019, confidence in the construction sector rose sharply to 34.1, from 7.5 in the preceding quarter, exceeding by a wide margin its long-term average of -14.2. Survey results show that both subcomponents improved significantly during the quarter under review.

Supplementary survey data indicate that, on balance, a larger share of respondents anticipated higher inflation in the next quarter, whilst a greater net percentage of firms reported positive developments in building activity during the preceding three months, amid increasing labour shortages and, to a lesser extent, increasing financial constraints

Confidence in the retail sector recovers

Sentiment in the retail sector rose to 10.7 from 0.9 in the fourth quarter of 2018, thus exceeding its long-term average of 2.8. The recent rise in confidence was driven by firms' assessment of business activity in the past three months and their expectations for the next three months.

In contrast, a larger share of respondents considered that their stock levels were above normal. Additional survey data indicate that on balance, a larger share of respondents expected employment to rise in the following quarters. Meanwhile, expectations for order levels turned positive.

In contrast, retailers' price expectations turned negative.