Businesses report positive expectations for activity over next three months

In the third quarter of 2022, business conditions continued to improve, a Central Bank of Malta (CBM) Business Dialogue Publication shows.

Indeed, the net percentage of firms reporting an improvement in activity over the three months preceding the interview increased marginally from 52 per cent in the second quarter to 54 per cent in the third quarter. During the quarter under review, 62 per cent of firms contacted reported higher activity while 8 per cent reported a decrease.

 The CBM gathered the outcomes of dialogues held with non-financial corporations during the third quarter of 2022, as part of its periodic business dialogue publication.

Looking ahead, expectations about business conditions are slightly more optimistic compared to the previous round of contacts. In fact, 44 per cent of the firms interviewed reported that they expect business activity to increase in the next three months, while 10 per cent anticipated a deterioration. Thus, a net share of 35 per cent expected an improvement in short-term business activity, compared to 31 per cent in the previous quarter.

Firms continue to be adversely affected by supply-chain disruptions and cost pressures, which have remained elevated in the third quarter of the year. Most companies were impacted by the war in Ukraine, mostly by higher import prices. Indeed, a net 88 per cent of contacts reported that input prices have increased. This was the highest net balance since the survey began.

To an ad-hoc question referring to expectations of unit costs in the next 12 months, 28 per cent of firms expected unit costs to remain unchanged, 35 per cent foresaw increases of up to five per cent, while around 22 per cent of companies replied that they expect increases in costs in excess of five per cent. Only five per cent of firms expected unit costs to decrease.

The net share of firms reporting higher selling prices stood at 52 per cent in the third quarter. This was down from 61 per cent in the previous quarter. Around 24 per cent of firms plan to increase prices by a lot.

In the third quarter of 2022, 83 per cent of respondents reported to have continued with their investment as scheduled, while three per cent said that they postponed their plans. The share of firms reporting that no investment was planned increased to 14 per cent, compared to three per cent in the previous quarter.

In view of positive business conditions, a net 48 per cent of firms plan to increase their staff complement, up from 42 per cent in the second quarter. This share is highest among real estate and construction firms. Businesses have continued to express concerns about labour shortages and pressures to increase wages.