Cyprus economic uncertainty indicator falls for fourth straight month

The Economic Sentiment Indicator in Cyprus fell by 0.2 points during January, reflecting weaker business confidence in several sectors, according to an Economic Tendency Survey compiled and published by the Economics Research Centre of the University of Cyprus (CypERC).

The centre said the marginal decline in the indicator was driven by weaker business sentiment in retail trade, construction and manufacturing, which almost fully offset the improvement recorded in services.

Consumer confidence remained at the high level recorded in December 2025, showing resilience despite sectoral pressures.

At the same time, the Economic Uncertainty Indicator declined for a fourth consecutive month, extending a downward trend observed since autumn.

The January decrease stemmed from lower business uncertainty across all sectors except manufacturing, according to the research centre.

Consumer uncertainty continued to stand at very low levels, despite an increase recorded in January.

In services, business confidence strengthened further, supported by improved expectations.

During January, business assessments of their recent financial situation deteriorated slightly, while responses regarding turnover over the past quarter improved marginally.

Expectations for turnover in the next quarter strengthened after two months of decline.

Business expectations regarding employment were revised downwards, although they remained fairly positive.

At the same time, expectations for selling prices in services increased for a second consecutive month.

In retail trade, business confidence declined, reflecting a worsening assessment of both the current situation and expectations.

The research centre said business responses on sales over the past quarter remained at the levels recorded in November and December, pointing to relative stability in sector activity.

However, assessments of current stock levels showed upward trends in inventories, weighing on sentiment.

Expectations for sales and orders to suppliers over the next quarter were revised sharply downwards in January.

Business expectations for employment in retail trade remained unchanged for a third consecutive month, indicating no substantial changes anticipated in sector employment.

Expectations for selling prices in retail were revised downwards in January.

In construction, business confidence fell sharply after remaining at a high level for three consecutive months.

The decline reflected a deterioration in both the current situation and expectations.

Construction firms assessed both their recent building activity and ongoing projects more negatively.

They also revised significantly downwards their expectations for employment over the next quarter.

Expectations for selling prices in construction were revised slightly downwards.

The sharp deterioration in construction sentiment in January was linked to a shift in business views from positive to neutral, without a meaningful increase in negative responses between December and January.

According to the surveys, 73 per cent of construction businesses described current overall activity levels as satisfactory, compared with 63 per cent in December.

At the same time, 97 per cent of respondents expected employment levels to remain stable over the next three months, up from 85 per cent in December.

The share of construction businesses reporting staff shortages as a factor limiting activity remained very high at 38 per cent, marginally down from 39 per cent in December.

An increase was also recorded in the proportion of firms citing weather conditions as a factor constraining activity, rising from 6 per cent in December to 11 per cent in January.

The January survey pointed to near full utilisation of productive capacity in construction, with labour shortages constraining activity for a significant share of firms for several months.

In manufacturing, business sentiment weakened, reflecting deterioration in both the current situation and expectations.

Business responses regarding production over the past quarter worsened slightly, while assessments of current orders remained broadly unchanged from December.

Evaluations of finished goods inventories continued to show upward pressure on stock levels, further weighing on sentiment in January.

Manufacturing firms also revised downwards their expectations for production in the next quarter.

Employment expectations in manufacturing continued to indicate stability, with no changes anticipated in staffing levels.

Expectations for selling prices in manufacturing remained at December levels.

Consumer sentiment remained stable in January, holding at the relatively high level recorded in the previous month.

Consumer assessments of the current financial situation of households and the country were unchanged from December levels.

In January, consumer expectations regarding the future financial situation of households were more favourable than in any month of 2025.

Although expectations for the country’s economic situation weakened in January, consumers were more optimistic about future labour market conditions than in the previous three months.

Consumer perceptions of price developments over the past 12 months continued to show some upward tendencies, as in December.

However, expectations for prices were revised downwards.

In January, intentions to make major purchases over the next 12 months weakened slightly.

Consumers were also more negative about the prospect of saving than at any point in the previous five months.

Capacity utilisation in accommodation and food services remained stable at the highest level reached since the pandemic, according to the survey.

Even so, utilisation remained slightly below pre-pandemic operating levels, possibly reflecting significant expansion in sector capacity in recent years.

In financial and insurance activities, capacity utilisation stabilised after the slight decline recorded between January and July 2025.

In professional and administrative activities, capacity utilisation in January remained at the relatively high level reached in July 2025.

In other services, capacity utilisation declined slightly, while remaining higher than in other service sub-sectors.