Issue link: https://maltatoday.uberflip.com/i/1421048
2 NEWS 21.10.2021 FROM PAGE 1 When compared with August, confidence fell in industry and to a lesser extent among con- sumers. Nevertheless, senti- ment remained positive in all sectors. The Bank's estimate of the COVID-19 Government Re- sponse Index – a composite indicator that summarises var- ious containment, economic and health-related measures introduced in response to the pandemic – remained un- changed from its level a month earlier and stood marginally above that reported in the euro area. In August, commercial and residential permits rose on their year-ago level. Meanwhile, the number of final deeds of sale for residential property also rose on an annual basis while promise-of-sale agreements decreased. In the same month, industrial production contract- ed on an annual basis follow- ing four months of consecutive growth. However, the volume of retail trade rose at a faster pace. The number of registered unemployed persons declined both when compared with July and when compared with a year earlier. The unemployment rate remained unchanged at 3.2% in August, marginally below its pre-pandemic level. The annual inflation rate based on the Harmonised In- dex of Consumer Prices (HICP) stood at 0.7% in September, up from 0.4% in August, while that based on the Retail Price Index rose to 2.2% from 2.1% a month earlier. The difference between the two measures of inflation reflects technical factors re- lated to the revision of HICP weights in 2021. Maltese residents' deposits expanded at an annual rate of 10.4% in August, following an increase of 11.0% in the pre- vious month, while annual growth in credit to Maltese res- idents eased to 8.0%, from 8.6% a month earlier. In August, the cash-based Consolidated Fund recorded a surplus when compared with a deficit a year earlier, reflecting an increase in government rev- enue, which more than offset a rise in government expendi- ture. IN September, the European Commis- sion's Economic Sentiment Indicator (ESI) stood at 111.5, down from 115.6 in August. Sentiment remained well above its level in September 2020 and its long- term average of around 100.0, but stood below that in the euro area, where the index reached 117.8. e month-on-month fall in sentiment in Malta was largely driven by industry, and to a lesser extent, by developments in consumer confidence. By contrast sentiment improved among services firms, and to a lesser degree, in the retail and construction sectors. Despite mixed developments in month-on-month terms, all components of the indicator were positive in September. Demeaned data – which account for the variation in weights assigned to each sector in the overall index – show that the decrease in overall sentiment in September was mainly driven by weaker sentiment in industry, although a mar- ginal decrease in the contribution of consumers also contributed. By contrast, the contribution of the ser- vices sector turned positive in the month under review. At the same time, the con- struction and retail sectors contributed more positively relative to August. Industrial confidence fell to 0.1 in Sep- tember, from 22.8 in the previous month. Despite this, sentiment remained above its long-term average of -4.1. e latest decrease in sentiment was broad based across all sub-components of the indicator, largely reflecting devel- opments in firms' assessment of order book levels. In September, consumer confidence eased to 7.4, from 9.0 in August, staying- well above its long-term average of -10.6. Weaker sentiment was mainly driv- en by consumers' expectations of their financial situation over the coming months and, to a lesser extent, by their assessment of their financial situation over the last 12 months. Expectations about the general economic outlook also weakened. September aggregate economic activity remained below pre-pandemic levels The Bank's BCI indicates that in September business activity continued to improve on a year-on- year basis, though it is gradually receding from recent historical highs. The improve- ment in recent months is from a very low base, as 2020 marked a historical low point for most economic variables. As a result, strong annual growth rates are being recorded in several BCI com- ponents in recent months, reflecting positive base-effects from the low levels seen a year earlier. This was mostly evident in the case of gross domestic product (GDP), tourist arrivals, economic sentiment, and selected govern- ment revenue items. Moreover, the unemployment rate contin- ued to fall in annual terms. At the current juncture, the BCI readings should be interpreted as indicating an improvement from the trough of 2020. -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 J 2016 M M J S N J 2017 M M J S N J 2018 M M J S N J 2019 M M J S N J 2020 M M J S N J 2021 M M J S Business Conditions Index 1 standard deviation – upper range 1 standard deviation – lower range Chart 1 BUSINESS CONDITIONS INDEX (standardised) Source: Central Bank of Malta. 0 10 20 30 40 50 60 70 80 90 100 1 Jan. 2020 19 Jan. 2020 6 Feb. 2020 24 Feb. 2020 13 Mar. 2020 31 Mar. 2020 18 Apr. 2020 6 May 2020 24 May 2020 11 June 2020 29 June 2020 17 July 2020 4 Aug. 2020 22 Aug. 2020 9 Sep. 2020 27 Sep. 2020 15 Oct. 2020 2 Nov. 2020 20 Nov. 2020 8 Dec. 2020 26 Dec. 2020 13 Jan. 2021 31 Jan. 2021 18 Feb. 2021 8 Mar. 2021 26 Mar. 2021 13 Apr. 2021 1 May. 2021 19 May. 2021 6 June 2021 24 June 2021 12 July 2021 30 July 2021 17 Aug. 2021 4 Sep. 2021 22 Sep. 2021 MLT Stringency EA-19 Stringency MLT Government Response Index EA-19 Government Response Index Chart 2 GOVERNMENT RESPONSE INDEX (standardised) Sources: Central Bank of Malta; Oxford COVID-19 Government Response Tracker (OxCGRT). sentiment, and selected govern- ment revenue items. Moreover, the unemployment rate contin- ued to fall in annual terms. The high reading for the BCI follows a period of subdued activity and thus should not be interpreted as implying that economic activity necessar- ily returned to pre-pandemic levels. At the current juncture, the BCI readings should be interpreted as indicating an improvement from the trough of 2020. 3 BOX 1: COVID-19 GOVERNMENT RESPONSE INDEX – MALTA Some COVID-19 con- tainment measures were relaxed during Septem- ber, including the easing of rules for recreational establishments, the re-introduction of both indoor and outdoor stand- ing events for those fully vaccinated capped at 100 persons, an increase in the maximum number of persons who can attend seated events as well as a reduction in the dis- tance between bubbles for seated events, from two metres to one metre. 4 However, Malta's COVID-19 Government Response Index (GRI) ended September at 57.8, similar to the level recorded at end-August (see Chart 2). The Stringency Index also retained the level recorded at the end of August, at 43.5. Malta's index ended September 0.5 points below that in the euro area. Meanwhile, the GRI ended the month 1.1 points higher than the euro area average, which closed the month at 56.7. Business Conditions Index Business and consumer surveys - Balances, percentage points, seasonally adjusted Business and consumer confidence indicators In September, the European Commission's Economic Sentiment Indicator (ESI) stood at 111.5, down from 115.6 in August (see Table 1). Sentiment remained well above its level in September 2020 and its long-term average of around 100.0, but stood below that in the euro area, where the index reached 117.8. 5,6,7 The month-on-month fall in sentiment in Malta was largely driven by industry, and to a lesser extent, by developments in consumer confidence. By contrast sentiment improved among ser- vices firms, and to a lesser degree, in the retail and construction sectors. Despite mixed develop- ments in month-on-month terms, all components of the indicator were positive in September. Demeaned data – which account for the variation in weights assigned to each sector in the overall index – show that the decrease in overall sentiment in September was mainly driven by weaker sentiment in industry, although a marginal decrease in the contribution of consumers also contrib- uted (see Chart 3). By contrast, the contribution of the services sector turned positive in the month 5 The ESI summarises developments in confidence in five surveyed sectors: industry; services; construction; retail; and consumers. Weights are assigned as follows: industry 40%; services 30%; consumers 20%; construction 5%; and retail trade 5%. 6 Long-term averages are calculated over the entire period for which data are available. For the consumer and industrial confidence indi- cators, data became available in December 2002, while the services and construction confidence indicator data became available in May 2007 and May 2008, respectively. The long-term average of the retail confidence indicator is calculated as from May 2011, when it was first published. However, the long-term average of the ESI is computed from December 2002. 7 In January 2021, data were revised for previous periods following the annual updating of country weights and the inclusion of 2020 in Table 1 BUSINESS AND CONSUMER SURVEYS Balances; percentage points; seasonally adjusted 2019 2020 2020 Sep. Jan. Feb. Mar. Apr. May June July Aug. Sep. ESI 102.4 81.4 88.8 85.8 88.1 95.0 117.3 115.2 113.5 110.0 115.6 111.5 Industrial confidence indicator -6.7 -25.1 -13.2 -24.0 -18.6 -1.1 36.0 9.4 8.7 3.0 22.8 0.1 Assessment of order-book levels -23.0 -48.8 -47.0 -41.4 -53.8 -41.4 -16.7 -30.1 -39.0 -12.0 22.8 -29.2 Assessment of stocks of finished products 15.5 27.2 16.4 36.0 28.6 -11.3 -42.5 -21.0 0.8 -1.1 -1.1 4.0 Production expectations for the months ahead 18.4 0.8 23.7 5.5 26.6 26.7 82.1 37.2 65.9 20.0 44.7 33.5 Consumer confidence indicator 4.5 -5.6 -9.1 -3.2 -6.9 -7.9 5.2 8.3 6.0 3.8 9.0 7.4 Financial situation past 12 months 11.3 -1.6 -10.4 -15.4 -15.5 -18.6 -15.9 -11.7 -11.0 -6.8 -2.8 -5.7 Financial situation next 12 months 11.2 0.8 -2.6 4.3 -0.7 0.4 11.5 15.0 10.4 8.4 11.5 6.8 Economic situation next 12 months 20.9 -0.9 -2.1 8.7 4.5 3.6 30.7 35.3 31.3 19.4 24.7 22.3 Major purchases next 12 months -25.1 -20.5 -21.5 -10.4 -15.8 -16.8 -5.5 -5.6 -6.5 -5.6 2.7 6.4 Retail trade confidence indicator 4.2 -31.0 -63.7 -51.4 -49.0 -38.2 -50.3 -1.9 -8.7 -12.6 15.2 21.8 Business activity, past 3 months 18.9 -22.2 -67.6 -51.6 -42.2 -58.6 -70.3 -43.3 -46.9 -1.5 34.3 38.2 Stocks of finished goods 17.4 31.9 52.6 50.3 33.5 37.2 42.4 -3.5 3.5 3.1 13.6 -2.9 Business activity, next 3 months 11.1 -38.8 -70.8 -52.4 -71.4 -18.7 -38.1 34.2 24.4 -33.2 24.8 24.2 Construction confidence indicator 26.2 -5.7 -3.0 -1.2 -8.3 -8.5 9.6 21.9 8.9 -4.8 5.9 12.5 Evolution of your current overall order books 19.7 -6.2 8.0 -3.4 -13.6 -12.0 4.0 4.7 11.7 -13.5 -2.9 6.0 Employment expectations over the next 3 months 32.6 -5.2 -14.0 0.9 -3.0 -5.0 15.3 39.0 6.1 4.0 14.7 19.0 Services confidence indicator 20.7 -24.9 -3.5 -5.3 -3.7 -11.1 5.4 30.8 36.7 34.7 17.8 32.8 Business situation development over the past 3 months 16.7 -36.3 -2.4 -12.3 -12.4 -11.0 -1.1 16.6 19.6 29.5 12.6 6.4 Evolution of the demand over the past 3 months 21.5 -34.9 -0.1 -10.5 -16.8 -19.1 -5.1 25.1 44.5 29.4 14.0 39.0 Expectation of the demand over the next 3 months 24.0 -3.7 -7.9 6.7 17.9 -3.1 22.5 50.8 46.0 45.2 26.9 53.1 EEI 102.7 86.0 84.4 88.8 87.0 88.4 96.6 108.4 110.8 113.4 112.6 118.7 Services 17.5 -2.4 -5.0 -1.6 -11.8 -9.9 13.0 31.0 37.3 46.5 29.7 55.2 Retail 4.7 -11.6 -25.3 -5.4 -5.7 14.5 -18.4 7.3 6.0 6.0 11.2 17.7 Construction 32.6 -5.2 -14.0 0.9 -3.0 -5.0 15.3 39.0 6.1 4.0 14.7 19.0 Industry 12.8 -12.5 2.8 -5.7 10.3 -8.1 18.0 9.3 21.4 15.3 44.2 8.6 ESI demeaned 2.4 -18.6 -11.2 -14.2 -11.9 -5.0 17.3 15.2 13.5 10.0 15.6 11.5 EEI demeaned 2.7 -14.0 -15.4 -11.2 -12.9 -11.7 -3.1 8.2 10.8 13.3 12.9 18.4 Source: European Commission. 2021 Business and consumer confidence indicators