Real estate and construction business conditions improve despite stagnation elsewhere

The perception of local business conditions is improving in the real estate and construction sector, while stagnating in others, according to a new survey by the Central Bank of Malta (CBM).

Beyond the main take-aways, BusinessNow.mt is delving deeper into which sectors are driving positive sentiment, and which ones have a less-than-rosy view.

The survey, conducted during the final quarter of 2021, indicated that – on balance – positive business conditions appear to have softened, compared to the previous quarter.

This period was characterised by rising COVID-19 daily cases and added restrictions.

This means that while businesses’ sentiment of conditions remains positive, the difference between those reporting improved and worsened conditions has narrowed.

A net share of 49 per cent of respondents recorded an improvement in Q3 compared to 36 per cent in Q4.

This trend was far from uniform across sectors, however, with conditions in the services and wholesale and retail sectors, plus to a lesser extent manufacturing, moderating the most.

By contrast, the assessment of respondents in the construction and real estate sector improved considerably compared to the third quarter, according to the survey.

In this sector, conditions improved, while a net of 25 per cent of respondents considered conditions to have improved, up from nil in the third quarter.

On the other hand, in the wholesale and retail sector, a net 33 per cent of respondents found conditions to have improved in the quarter, down from 44 per cent in the quarter preceding.

At the same time, the percentage of firms in the services sector stating that business conditions had worsened increased to 18 per cent.

These firms provide services related to logistics, entertainment and hospitality.

Reflecting this development, the net balance of services firms reporting an improvement fell from 68 per cent in the third quarter to 53 per cent in the last three months of the year.

However, these sectoral results are not reflective of respondent’s predictions for the coming months.

Regarding projections for short term business conditions, the survey presented a slight increase in the number of respondents expecting conditions to decline in the next three months, driving a net decrease in sentiment.

Almost half (48 per cent) of firms contacted in the final quarter projected conditions to improve, largely in line with the same figure for the previous quarter, however, the number of firms expecting conditions to worsen rose from 11 per cent in Q3 to 16 per cent in Q4.

Subsequently, the net share of firms reporting an improvement in their near-term outlook fell from 37 per cent to 33 per cent.

Notably, as opposed to the first mentioned general business conditions, the construction and real estate sector was pessimistic in its short-term outlook, leading the net decline along with the services sector.

In the former, net sentiment is declining, with a rise in the share of respondents expecting an improvement in activity over the next few months being outweighed by a larger increase in the share of respondents expecting a worsening.

Companies in the manufacturing sector presented a particularly optimistic outlook, with half of them expecting an improvement in their business activity in the first quarter of this year, with only 10 per cent expecting them to decline.