Business conditions positive for first time since start of pandemic, reports Central Bank

Overall business conditions turned positive during Q2 for the first time since the start of the pandemic, according to the Central Bank of Malta’s Business Dialogue report, released on Wednesday.

A net share of 28 per cent of businesses consulted for the report found that business conditions had improved, compared to a net of 34 per cent that reported a deterioration in the previous quarter.

Around half of firms consulted reported higher activity, while one-fifth of those interviewed said that business activity worsened. Moreover, 30 per cent found that business conditions remained unchanged.

The results were compiled from a total of 62 telephone and virtual meetings in Q2 between April and June, between the bank and various non-financial corporations.

Following the lifting of COVID-related restrictions, a net 30 per cent of respondents within the wholesale and retail sector assessed conditions to have improved, up from 22 per cent in the previous quarter.

A strong pickup in demand was also reported by firms selling durables and electronics, domestic appliances, food and beverage items, and clothing and footwear in May and June.

On a less positive note, the survey also found that input prices are increasing, with the “vast majority” of those contacted by the bank reporting the increase and some of these claiming they’ve had to increase selling prices.

Particularly notably, the rise in prices for many raw materials was reported to have accelerated in recent months, “given the rise in global demand and supply imbalances”.

Almost 70 per cent of respondents said their investment plans were continuing as scheduled, though 15 per cent reported a postponement.

No respondents said they’d cancelled investments, though a significant percentage (16 per cent) said they didn’t have any planned investments.

The improvement in business conditions can mostly be attributed to the services sector, which the bank says underwent an impressive upturn in activity.

The net balance of replies in the sentiment shifted from – 69 per cent in the first quarter of the year to 55 per cent.

In particular, business conditions are reported to have improved in the gaming, transport, logistics and freight forwarding, travel, financial, catering, and accommodation and hospitality services sub-sectors.