Total Business Climate Indicator Down 0.6 Points in May

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Total Business Climate Indicator Down 0.6 Points in May

In May 2008 the economic conjuncture in the country remains favorable although the total business climate indicator decreases by 0.6 percentage points as compared to the previous month, The National Statistics Institute said in a report.

The indicator is still 21.8 percentage points above the 10-years long-term average.

Industry. The last inquiry showed an advance by 1.0 percentage points of composite business climate indicator in industry as a result of the more optimistic prognoses about the business situation in the branch over the next 6 months. Expectations about development of the activity over the next 3 months were also favorable. According to managers in the sector the production activity on May is higher than in April. However, the current level of orders from abroad is lower and domestic orders are expected to remained unchanged.

The uncertain economic environment, the insufficient domestic demand and the shortage of labor continue to be main factors limiting the activity in the branch.

Most industrial enterprises (84.6%) expect selling prices to remain unchanged over the next 3 months.

Construction. In May the economic conjuncture in construction remains favorable although the composite indicator of business climate was by 4.0 percentage points below its April level. The decline is attributed to the shift of managers’ expectations for the next 6 months from “better” towards “preserving the same” business situation.

Managers expect construction activity in the following 3 months to stay around the same levels

The labor shortage, the high prices of materials, the competition in the branch and the uncertain economic environment were the factors pointed out by more than one third of the enterprises as limiting their activity.

About half of construction entrepreneurs expect selling prices to rise in the next few months.

Retail trade. In May 2008 the composite indicator of business climate in retail trade remained unchanged. The last inquiry recorded a shifting of managers' opinions about present business situation from optimistic to moderate, whereas their expectations over the next 6 months were in course of improvement. According to managers, sales over the last 3 months increased and are to keep around the same levels in the following 3 months.

The competition in the branch, the insufficient demand and the uncertain economic environment, continue to be the most serious factors limiting enterprises, being cited by 36.4, 34.7 and 29.6% of the businesses respectively.

Service sector. The composite indicator of business climate in service sector in May dropped by 0.9 percentage points as compared to a month before, which was due to the slightly increased managers’ pessimism about the present business situations in enterprises.

However, forecasts about the development of the business over the next 6 months remained favorable. Managers said demand for services in the sector improved and they expect demand in the next three months to stay high. Enterprises do not need additional personnel, the report also states.

Competition in the branch continues to be the most serious factors limiting the activity in the branch (according to 61.1% of the managers).

Most of enterprises (65.2%) expect selling prices in the sector to stay unchanged in the next 3 months.

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