ECONOMY

Economic sentiment index in decline

economic-sentiment-index-in-decline

Price hikes in raw materials and energy are containing industry and consumer expectations, with the Foundation for Economic and Industrial Research (IOBE), which carries out the monthly economic sentiment survey, estimating that the negative effect of price rises on expectations – particularly those of households – is likely to grow further in the following months.

Furthermore, the slowdown recorded in vaccinations, the imposition of some restrictions on the unvaccinated, and the uncertainty over the course of the pandemic are also aggravating economic sentiment.

Consequently, after seven months, the monthly index reversed its rising course and slipped to 109.7 points in September, from 113 points in August. This downturn is attributed to the considerable weakening of business expectations in industry, as well as the fresh decline in consumer confidence, which started in June.

“For the time being the impact of the hikes has been more acute for industry and households, but as long as prices remain high, problems may expand to production, supply chains and employment. More significance will lie in developments in the implementation of the Recovery Fund projects, combined with the accompanying reforms,” IOBE noted in its monthly report.

The business expectations index declined to 106.9 points last month from 114.6 points in August. The sector is dominated by uncertainty, with 50% of businesspeople surveyed saying it is hard or very hard to predict the outlook for their company, against 42% in August.

Households are even more pessimistic, with the consumer confidence index coming to -38.3 points in September, from -32.9 in July and -35.1 in August. More than half (55%) of households are anticipating an increase in retail prices, leading to a deterioration in their predictions regarding their finances, and to a significant weakening in their intentions for major purchases.

On the other hand, the construction sector has found itself at its best level of the last 21 years; however, this improvement is rooted exclusively in the public works domain, as sentiment in the private construction domain suffered a steep decline. The business expectations index in construction came to 153.5 points in September, the third highest level of all time.