The European Commission’s monthly survey of households and businesses showed that in August Malta’s economic sentiment index reached 116. This is 16% better than the historical average and 41% better than the level observed in August of last year.
Moreover, this is the highest level of economic sentiment expressed in the month of August since this survey began in Malta almost two decades ago. The previous record had been observed in August 2007, just before the 2008 crisis.
In every sector, economic sentiment was positive. In the euro area, this is a feat equalled only in Finland and in Ireland. However, in Malta, sentiment is not just positive; in industry, retail, construction, and among households it currently stands better than the historical average, while in services sentiment is hovering around the historical average. Compared to July there has been an overall improvement in economic sentiment of 5% in Malta, against a drop of more than 1% across the EU.
Maltese and Gozitans most optimistic in the EU
Another interesting fact is that Maltese and Gozitan families are the most optimistic across the EU. A majority of 12% are expecting that their financial situation will improve in the coming period. An even stronger majority, of 25%, believe our country’s economy will expand this year. This when in the EU most households still expect their national economy to deteriorate further.
In our country families have told the Commission that they feel they can afford to undertake above-normal expenditure outlays now. Moreover, they believe that even if they do so, they will still be able to save more. In Europe, by contrast, a majority of households say they cannot afford to undertake significant consumption. They also argue that unemployment will continue to rise, contrary to what Maltese and Gozitan families think, as local families are expecting a decline.
Industry most optimistic economic sector
The optimism observed among families, if anything, is even more pronounced among businesses. The most optimistic sector is industry. A majority of 40% of the factories interviewed said they had increased production in recent months. A similar majority said they expect further growth in the coming months. So much so that these companies claimed to have around six months of guaranteed production in orders they had already received. Two fifths of factories are therefore anticipating that they will have to increase employment to be able to satisfy demand.
After manufacturing, the most optimistic were operators in the services sector. Until a few months ago they were the most pessimistic businesses. Now a majority of 13% of these businesses have reported an increase in activity in recent months. More than twice as many operators expressed a belief that demand will continue to rise in the coming months. As a result, almost a third of these companies anticipate that they will need to hire more workers.
Optimism in the retail sector has also increased substantially, so much so that it is now better than the historical average. This is the first time that an increase in activity was noted in this sector since Christmas. Furthermore, it was the first time since the pandemic began in 2020 that retail operators told the Commission that they are projecting a further increase in orders in coming months.
In construction, a majority of one in six firms claimed to need more workers. This is in a context that these operators have a backlog of work that will require more than eight months, or almost one and a half times the historical average.
Coming after the statistics showing that the second quarter GDP growth was the highest on record, the Commission’s sentiment survey suggests that the pace of the recovery has continued to accelerate. The third quarter is therefore likely to result in another strong GDP growth rate.