Confidence in the construction sector appears to be on the decline, with the sector’s overall confidence rating shrinking in March, according to the Central Bank’s Economic Update published on Friday.
The data came from the European Commission’s Economic Sentiment Indicator (ESI), which shows that business confidence as a whole grew to a 12-month high in February, with strong increases in both the retail and services sectors.
On the other hand, both construction and consumer confidence dipped, with the rating for the construction industry plummeting from 17.5 in February to -0.2 in March.
The ESI measures confidence levels across several industries, asking operators within each industry to predict positive or negative changes within their industry over the coming months. The ESI then aggregates the responses it receives to derive a numerical confidence rating.
In the case of the construction industry, the ESI asks operators to estimate whether they expect their firm’s employment to increase or not over the next months, if the future of their business is easy or difficult to predict and if they expect the prices they charge to change in the near future, among other things.
According to the index, confidence in the sector has fluctuated over the past months. It fell as low as -4.3 in December, soaring to 17.5 in February, before its most recent dip to -0.2 in March.
This most recent figure is squarely below the overall confidence rating for both 2021 and 2022, which hovered around a rating of 7.0. However it remains higher than the long-term average of -8.5.
Permits down
The number of development permits for both commercial and residential properties decreased throughout February compared with the same period the previous year, with a total of 310 fewer permits issued.
Likewise, the Central Bank report found that 154 fewer property transactions were carried out this March compared to March 2022.
A recent Times of Malta fact-check into the construction industry’s performance identified a similar trend, concluding that “while the sector is not in crisis, it is experiencing a decline”.
The Central Bank also highlights how an increase in Malta’s uncertainty indicator, which gauges how difficult it is for sectors to predict their future situation, was “mainly driven” by the construction sector’s relatively poor performance.
Negative view of economy
Consumer confidence also dipped to -10.9 in March, below its long-term average of -10.2. According to the Central Bank, this reflects “a more negative assessment of the general economic situation over the next 12 months as well as consumers’ assessment of their financial situation over the last 12 months”.
Other sectors fared better, with retail and services both ranking well above their long-term averages.
The report also outlines a “strong increase” in the performance of firms producing pharmaceutical products, as well as those producing electronic items, chemical products and the printing sector.
This comes amid the ongoing debate on the need to diversify Malta’s economy, with Finance Minister Clyde Caruana recently pointing to the possibility of expanding Malta’s manufacturing sector.
Several experts in the field also recently told Times of Malta that Malta needs to diversify its economy by “exploring new niches in existing sectors” and strengthening its manufacturing industry.