Business confidence down at the beginning of 2022

Business confidence has varied since coronavirus outbreak

At the beginning of 2022, the business confidence index stood at 6.4. This is approximately 13 points lower than a quarter previously, when the index hit a record high. The business confidence index comprises a composite indicator for expectations as well as – the larger part - realisation. For the latter, entrepreneurs assess whether certain indicators have improved relative to the previous quarter.

Despite the strong decline, business confidence was at a higher level at the beginning of 2022 compared to the first quarter of 2021, when many businesses were forced to close doors due to a lockdown, just as they were at the start of this year. A year ago, business confidence fell slightly in the first quarter and the sentiment was still predominantly negative.

Sentiment reversed in accommodation and food services

In virtually all sectors, business confidence declined relative to the previous quarter, but in most sectors it remained positive. In accommodation and food services, the mood changed substantially from positive to negative, with confidence reaching the lowest point of all sectors. This was mainly related to how entrepreneurs in this sector saw turnover and the economic climate deteriorate over the three preceding months. One quarter previously, the same indicators were still improving relative to the second quarter, when strict COVID-19 measures were in place; at that time, business confidence was highest in the accommodation and food services sector.

Retailers were in a pessimistic mood as well at the beginning of 2022. Entrepreneurs in the sectors of information and communication, mining and quarrying and wholesale trade remained optimistic, despite some decline in business confidence. In the real estate sector, however, the sentiment indicator improved slightly. This was mainly related to the turnover increase recorded by this sector over the three preceding months.

More obstacles due to lack of resources, materials and space

Each quarter, the Business Survey asks about obstacles entrepreneurs are facing in production processes and in business activities. The most frequently faced obstacle for entrepreneurs in early 2022 was a shortage of staff. The share reporting this stood at nearly 28 percent in early 2022, following several consecutive quarters with an increase. In addition, more and more entrepreneurs reported shortages of production resources, materials or equipment, and space. At the start of 2022, almost 14 percent indicated such shortages, against less than 3 percent on average in the same period over the years 2012-2020. Larger enterprises were more likely to report obstacles. Around 17 percent of the enterprises with 100 or more employed persons indicated this. The share was lowest among enterprises with 5 to 20 employed persons at 11 percent.

The share of entrepreneurs who were hampered by a shortage of production resources, materials, equipment or space was above the long-term average in almost all sectors. The share was relatively highest in the automobile trade at approximately 29 percent, i.e. around 10 times the long-term average. In sectors such as manufacturing, wholesale trade, real estate and construction, the percentage share far exceeded that in previous years as well. On the other hand, the number of entrepreneurs facing equipment shortages was slightly lower than previously in the accommodation and food services sector.