Financial & Construction Sectors out of Spring Vibes!
Overall, the BCI has gained 4.4 points compared to Q1 2019. Expectations in the private sector in Georgia increased significantly by 9.2 percentage points, reaching 45.5 index points. Business performance over the past three months decreased, reaching nearly 23.0 points (down from 24.4), indicating a downturn in production/turnover/sales. At the same time, business expectations boosted to a higher rate and past performance experienced a slight reduction, which together have led to a lift in the overall BCI.
The BCI index increased in the retail trade (16.6), manufacturing (14.8), service (9.2) and agriculture (0.9) sectors. The construction and financial sectors declined by 27.9 and 24.5 points respectively. Business confidence in the second quarter of 2019 increased for large firms (5.7) and dropped for SMEs (-7.8).
Past performance
Businesses’ actual performance decreased by 1.4 points compared to Q1 of 2019. In Q2 2019, sales (production or turnover) of the 87 firms surveyed decreased from 24.4 (Q1 2019) to 23.0 (Q2 2019).
A significant drop in performance was observed in finance (-30.2), manufacturing (-6.7) and service (-4.1). A significant decrease means that in these sectors, the weighted balance between positive and negative responses decreased compared to the previous quarter. In the remaining sectors, production/turnover/sales for the past three months improved or remained unchanged: retail trade (20.7), agriculture (6.0) and construction (no change).
Expectations
The Expectations Index increased by 9.2 index points in Q2 2019. Expectations about the next three months improved for all business sectors except the financial (-46.5) and construction (-46.5) sectors. The greatest jump was reported in manufacturing (60.5). Business expectations increased for large firms and worsened for SME firms.
The majority (67%) of surveyed businesses do not expect any changes in employment over the next three months. Furthermore, 24% of firms stated that they would employ more employees in the future.
36% of the surveyed firms expected that the economic condition of their businesses would improve over the next three months, and 51% did not expect any changes in the future, while a lower share of businesses expect their business conditions to worsen.
Sales Price Expectations
The Sales Price Expectations Index decreased from 17.5 points (Q4 2018) to 12.8 points (Q1 2019). The reduction in the index is mostly driven by a decrease in the retail trade and service sectors. The manufacturing, construction, and agriculture sectors expect a noticeable increase in prices over the next three months.
The majority (73%) of all surveyed firms are not going to change the prices they charge over the next three months. Only 6% of firms expect to decrease prices, and 21% expect to increase prices in the future.
The lack of demand (58%) and limited access to finance (39%) continue to be two of the most significant obstacles for SMEs. Meanwhile, large companies named access to finance (41%) and labour force (36%) as main limiting factors.
It should be noted that the BCI results presented here may be overestimated, as the survey only covers businesses currently operating and not those that have already exited the market. Firms still in operation are, to some extent, more likely to have a negative outlook.
Business Confidence IndexQ2 2019