After economic confidence softened in December, as indicated by a recent Central Bank of Malta report, sentiment appears to have rebounded sharply in January. This rebound is confirmed by the monthly economic sentiment survey carried by the European Commission among households and businesses in our country.
This survey shows that in the first month of the year Malta’s economic sentiment index reached 102. Any value above 100 indicates that sentiment is above the historical average. In fact, economic sentiment is 19% better than the level observed in January 2021. Moreover, the level of optimism was at the same level registered in January 2020, that is before the pandemic started.
Although the country is still in the throes of a pandemic, according to the European Commission’s survey, optimism this January was higher than it was in January 2013, or a few months before the change in Government.
Even compared to when Malta was passing through the post-2008 recession, households and businesses are much more confident at present. Which is not a surprise that if one averages the sentiment in the country between March 2008 and March 2013, this was still much worse than it is at present.
Economic sentiment in Malta improved by 5% between December and January. This while the same European Commission survey shows that economic sentiment decreased by 1% across the European Union. By contrast in every sector in our country, excluding services, sentiment in January 2022 was better than the historical average.
Maltese and Gozitan families were among the most confident of families across the Union. A majority of 4% believe that our country’s economy will grow. To see what an outlier Malta is, just consider that across the European Union a majority of 17% of households expect their national economy to deteriorate.
Maltese and Gozitan families were among the most confident of families across the Union.
In our country a majority of 5% of households said they feel they can afford to make higher-than-normal purchases. This while a majority of 3% say that they will still manage to save more despite this increased consumption. In Europe, by contrast, a majority of households say they cannot afford higher consumption. This is in the light of their expectation that unemployment will continue rising, contrary to Maltese and Gozitan families’ conviction that joblessness will drop further.
Even in manufacturing, business sentiment is much better than in January 2021. A majority of almost half of the factories that were interviewed said they had increased production in recent months. But still, these companies said that they have more than three months of guaranteed production in orders they have already received. To keep up with this backlog, a majority of 13% of factories are anticipating that they will have to recruit more workers in the coming months.
In services although sentiment is still positivity, it is slightly lower than it was in the same month a year ago. A small majority of service operators reported a decline in activity, but they expect a recovery in the coming months. So much so that a majority of more than a third of companies in this sector are anticipating that they will need to hire more workers.
In the retail sector, sentiment is absolutely the opposite of what it was a year earlier, when it was characterised by extraordinary pessimism. After very good months, majority of 4% of operators said they expect further growth in the coming months.
In construction, sentiment is also very positive, with a majority of 16% of firms saying that they need more workers. This is in a context that these operators have on average a backlog of orders for 6 months, or twice the historical average.