Services, the sector with the most confidence in the business climate of Ecuador

The Business Confidence Index, which measures the perception of the business climate of companies, improved, driven by an increase in household consumption.

The Business Confidence Index it was of 1,585 points in April from 2022, 14.4 points more than in March of 2022, according to the Banco Central (BCE).

The ECB does this monthly survey of 1,025 companiesto measure their perception of the business climate in the country.

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Thus, the indicator measures the predisposition of companies to make decisions such as: new investments, increased production or increased jobs.

Consumption increase

In the first four months of 2022, the Business Confidence Index has improved because the household consumption is growing compared to 2021, says Jorge Calderón, economic analyst.

Calderón explains that with less restrictive measuressuch as the elimination of the mandatory use of a mask in certain places, people feel safer to go out and this is reflected in increased consumption and sales.

The greater confidence of entrepreneurs in the business climate is also due to the fact that the government has generated stability in public accounts, Calderon adds.

Trade with more confidence

The Business Confidence survey measures the perceptions of companies in four sectors: manufacturing, commerce, services and construction.

Only the sector of construction showed a slight decrease of 0.4 points in the Business Confidence Index in April 2022 vs. March 2022 score.

Businesses in the services and commerce area were the ones that showed the most optimism in April 2022 compared to March 2022. The Business Confidence Index of the trade grew 17 points and services 22 points in that period.

According to the ECB, companies in the area of ​​the trade reported that their sales grew 2% in April 2022 compared to March 2022. In addition, the commercial sector projects an average sales growth of 2.9% for May 2022.

Meanwhile, the companies services they said they had a monthly growth of their sales of 1.7% in April 2022. The services activity believes that sales will increase by a similar percentage in May 2022.

Manufacturing grows at a slower pace

The growth of Business Confidence Index in the manufacturing sector lost pace in the fourth month of 2022.

The ECB survey shows that the indicator in these companies grew 6.3 points in April 2022 compared to March 2022.

However, in March 2022, the manufacturing indicator had grown much higher, at 35.8 points compared to February 2022.

Pablo Zambrano, president of the Chamber of Industries and Production (CIP)says that the growth of industries will be low in 2022 due to political uncertainty, which is an obstacle for investment.
Zambrano adds that in the months prior to 2022, a more accelerated growth of the Business Confidence indicator was registered due to the fact that businesses were recovering from the fall registered in 2020.

Current figures show that the sector has normalized, he says.

Challenges in the rest of the year

Hanns Soledispa director of Exponential Researchexplains that it is positive that the Business Confidence indicator improves.

Although, the expert adds that there are still factors that show that businesses have not been reactivated to pre-Covid-19 pandemic levels.

Soledispa highlights that the adequate employment figures are below what was registered during the pre-pandemic. while in March 2019 the adequate employment figure was 37.9%, in April 2022 fell to 32,5%.

A person has adequate employment when they earn at least the basic salary of USD 425 per month and work the regular 40 hours per week.

Inflation could be a problem for businesses in 2022. In fact, the increase in the price of some products in the basic basket could slow down household consumption in the following months.

In this scenario, Calderón suggests measures such as reduce red tapereduce the energy costs of companies and a labor reform that gives more flexibility to hire.

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