The Cypriot economy is currently exhibiting a complex panorama, with crucial economic indicators presenting divergent trends, according to recent analyses from the University of Cyprus’s Economics Research Centre (CypERC). While a key index forecasting future economic activity continued its upward trajectory throughout November, a separate indicator measuring the prevailing mood among businesses and consumers experienced a slight reduction. This divergence highlights an economy that is expanding, but is concurrently contending with sector-specific challenges and ongoing global uncertainties.
The Composite Leading Economic Index (CCLEI), which serves as a reliable predictor of the island’s economic performance in the forthcoming months, registered a significant year-on-year increase of 1.8% in November. This marks the third consecutive month of sustained growth, following a 1.9% rise in October and a revised 1.8% in September. Economists at CypERC have attributed this consistent positive momentum to several contributing factors, including a strong influx of tourist arrivals, robust retail sales figures, a steady volume of property sales contracts, and a beneficial decrease in the price of Brent crude oil. Furthermore, an improvement in economic sentiment both domestically and within the broader euro area has bolstered the index’s strength. A sole negative influence was observed in a declining trend in temperature-adjusted electricity production.
In contrast, the Economic Sentiment Indicator (ESI-CypERC), designed to assess current confidence levels among businesses and consumers, saw a marginal decrease to 104.0 points in November, down from 104.1 in the preceding month. This slight decline interrupts a recent period of improvement, during which the indicator had risen from 102.1 in September. A detailed examination of various economic sectors reveals the primary cause of this overall softening: a notable reduction in confidence within the vital services sector. The November report explicitly stated that the decrease in the Services Confidence Indicator was predominantly driven by a deterioration in firms' assessments of their recent turnover. This suggests that certain service-oriented enterprises are currently facing immediate revenue pressures, despite the generally favourable economic climate.
However, this sector-specific weakness was effectively counterbalanced by widespread improvements in other areas. Confidence within the retail trade sector experienced a substantial uplift, stimulated by more optimistic evaluations of inventory levels and sales performance. The construction industry also reported heightened optimism, largely owing to enhanced order books and more promising employment prospects. Industrial companies expressed slightly more favourable views regarding orders and production expectations, and consumers demonstrated increased confidence in their personal financial situations, the national economic outlook, and their readiness to undertake significant purchases. Significantly, this surge in consumer confidence contributed to a marked reduction in the Economic Uncertainty Indicator, which consequently fell to its lowest level in recent months at 10.9 points.
The authors of the CCLEI report have contextualized these developments, emphasizing that "The positive annual growth indicates that the Cypriot economy continues its positive course, although its growth momentum is taking shape in an environment of increased uncertainty and geopolitical tensions." The simultaneous ascent of the forward-looking CCLEI and the minor dip in current sentiment collectively portray an economy progressing steadily, yet remaining susceptible to disparities across different sectors. The resilience observed in retail, construction, and consumer outlooks provides a solid foundation; however, the subdued performance in services highlights potential vulnerabilities that could arise from shifting demand patterns or operational difficulties. As Cyprus transitions into the new year, the intricate interplay between these leading and coincident economic indicators will undoubtedly be closely monitored to ascertain whether the current expansion can successfully broaden its reach across all segments of the economy.