Businesses and households, whose estimates for the coming months are quite pessimistic, do not see light in the tunnel, due to the effects that the coronavirus has on economic activity. The economic climate showed a fatal deterioration in January 2021, according to new data announced by the Center for Economic Research of the University of Cyprus. In January 2021, the Economic Situation Index (CCI) for Cyprus deteriorated by 5.2 points, compared to December 2020 and fell to 78.5 points, from 83.7. The deterioration of the index came from the weakening of the business climate in all sectors and from a decline in consumer confidence.
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The vast majority of consumers expect unemployment to rise, while in January they revised down their expectations for the future economic situation of their households and the country in general. However, consumer responses to the current season's relevance to large markets were less negative than previous reports. Consumers were less negative than in December about the potential for savings over the next 12 months.
The business climate has deteriorated due to the worsening of the current situation. In January, business responses to sales in the last quarter were more negative and ratings for current stock levels recorded upward trends, exacerbating the climate. In contrast, business estimates for the next quarter on sales and orders to suppliers were less pessimistic than in December. In the service sector, the climate is heavy. In January, the assessments of financial aspects of companies during the last quarter, such as their financial situation, turnover and number of employees, were worse compared to December. At the same time, business estimates for the next quarter in terms of turnover and employment were revised significantly downwards. The marginal deterioration in the overall services index in January is mainly related to the sharp decline in capacity utilization in the hotels and restaurants sector, due to pandemic mitigation measures, which have affected the industry since November 2020.