Maltese businesses are markedly less concerned about future price increases, with the imported inflation experienced over the last year seemingly following a downward trajectory.

However, although the share of businesses reporting an increase in input prices over the last months is significantly down, it still represents more than half of respondents, going from 82 per cent in the last quarter of 2022 to 64 per cent in the first quarter of 2021.

The figures emerge from the Central Bank of Malta’s latest Business Dialogue Publication, which noted that “in view of the improved supply chain conditions, cost pressures have eased considerably but remain elevated from a historical perspective.”

Responding to a question on their medium-term expectations of unit costs, companies reported being less concerned about future increases in costs.

Indeed, 11 per cent of firms expected unit costs to decrease over the coming 12 months. Additionally, the share of companies which are anticipating an increase in unit costs fell from 52 per cent in the last quarter of 2022, to 39 per cent in the quarter under review.

The net share of firms reporting higher selling prices stood at 42 per cent in the first quarter of the year, down from 52 per cent in the previous quarter.

Firms were also asked to comment on the frequency of selling prices revisions, and most companies noted that they have been altering selling prices based on the changes in costs rather than at fixed intervals. Thus, the frequency of price changes varies significantly. Some firms change prices daily while others are bound by pre-determined contracts which only allow for infrequent revisions.

Overall, business conditions improved when compared to the previous quarter. The net percentage of firms reporting an improvement in activity over the three months preceding the interview increased from 27 per cent in the previous quarter to 41 per cent in the quarter under review.

This is because the share of firms that reported an improvement in business conditions increased to 62 per cent while the share of firms reporting a deterioration fell to 21 per cent.

Looking ahead, expectations about business conditions are more positive compared to the previous survey. In the first quarter of 2023, a net share of 48 per cent expected an improvement in short-term business activity. This compares with a net share of 31 per cent in the previous quarter.

In the quarter under review, the net share of firms planning to invest more increased from 27 per cent to 48 per cent, as the gross share of companies planning to invest more increased from 48 per cent to 60 per cent, while the share of firms planning to reduce investment declined by eight percentage points to 13 per cent.

While business conditions and expectations improved in this quarter, the net share of firms planning to increase their staff complement fell by 12 percentage points to a net 46 per cent. The net share of hiring firms was highest among construction and real estate firms (60 per cent).

Despite softening labour demand, businesses have continued to express concerns about labour shortages and pressures to increase wages.

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