Industry & services expect prices to keep increasing, but retailers anticipating a slow down in price hikes

Economic activity and the business sector’s confidence remained above average in March, according to a new report by the Central Bank of Malta, which also revealed different expectations as regards rising prices in different economic segments.

The bank’s Business Conditions Index for March indicates that annual growth in business activity remains above its long-term average, though normalising from previous months.

Similarly, the European Commission’s Confidence Survey shows that economic sentiment in Malta stood well above its year-ago level and its long-term average, though it declined in March when compared with a month earlier. When compared with February, confidence fell in industry and in the construction and retail sectors while sentiment in the services sector and that of consumers improved.

Additional survey information shows that a higher share of respondents in industry, the services sector and consumers expected prices to increase in the coming months. The share of retailers anticipating prices increases edged down from the previous month but remained elevated. On the contrary, price expectations in construction turned negative.

The European Commission’s Uncertainty Indicator for Malta declined when compared with February, signalling lower uncertainty. This decrease in uncertainty was largely driven by developments in the services sector.

In February, industrial production contracted again in annual terms, though at a slower annual rate when compared with January. Meanwhile, the volume of retail trade rose at a slower pace than previously.

The unemployment rate stood unchanged from the rate registered in the previous month and well below its pre-pandemic level.

In March, the number of final deeds of sale and promise-of-sale agreements for residential property fell on a year-on-year basis. Commercial permits decreased in February relative to their year-ago levels while residential permits increased markedly.

The annual inflation rate based on the Harmonised Index of Consumer Prices (HICP) stood at 4.5 per cent in March, up from 4.2 per cent in the previous month. Inflation based on the Retail Price Index (RPI) rose to 4.4 per cent in March, from 4.2 per cent a month earlier.

In February 2022 the Consolidated Fund deficit widened when compared with a year earlier as an increase in expenditure offset higher tax revenue.

Annual growth in residents’ deposits and credit remained strong in February, at 8.4 per cent and 8.2 per cent, respectively. By the end of the month 648 facilities had been granted in terms of the Malta Development Bank COVID-19 Guarantee Scheme, corresponding to total sanctioned amounts of €497.8 million, or 64 per cent of the scheme’s target size.