Bulgaria’s Business Climate Improves in July, Construction Leads Growth

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Bulgaria’s business climate improved slightly in July, with the strongest positive movement recorded in the construction sector, while services reported a decline, according to data from the National Statistical Institute (NSI).

The overall business climate indicator rose by 0.7 points compared with June, increasing from 16.1% to 16.8%. The improvement was mainly driven by more optimistic assessments among entrepreneurs in industry and construction, while confidence in the services sector weakened.

In industry, the indicator increased by 1.1 points, reaching 17.2% compared with 16.1% a month earlier. Industrial companies reported more positive views of their current business situation, although they noted a decline in new orders received over the past three months. Expectations for production activity in the coming quarter remained negative.

Average capacity utilization in the industrial sector stood at 72.9% in July, down 2.4 percentage points from April.

Businesses in the sector continued to identify the uncertain economic environment and labor shortages as their main challenges. Regarding prices, 81% of industrial managers said they expect no change over the next three months.

Construction recorded the largest improvement among all sectors. The business climate indicator there rose by 4.5 points, from 11.1% in June to 15.6% in July.

Construction companies gave more favorable assessments of their current condition and expressed expectations for an increase in new orders over the next six months. Entrepreneurs said this could lead to stronger construction activity in the short term.

The main difficulties for the construction sector remain the uncertain economic environment, shortages of workers and the cost of construction materials.

Retail trade showed almost no change, with the business climate indicator edging down from 27.3% in June to 27.2% in July. At the same time, retailers reported improved expectations regarding sales volumes both in recent months and for the next quarter.

The biggest challenges for retailers continue to be the uncertain economic environment, competition and labor shortages. More managers also said they expect sales prices to remain unchanged in the coming three months.

The services sector was the only area where business sentiment deteriorated. The indicator fell by 2.8 points, from 9.8% in June to 7% in July.

The decline was mainly linked to more cautious expectations among managers about the condition of their businesses over the next six months. Assessments of current and expected demand for services also remained unfavorable.

Despite weaker expectations, companies in the services sector do not anticipate changes in sales prices during the next three months.

Source: Sofia Morning News