Cost pressures surge while pricing power lags, Central Bank survey shows
Rising costs hit 86% of Maltese firms while only 51% raised prices, signaling margin pressure ahead.
The Central Bank of Malta's latest Business Dialogue survey reveals a sharp rise in cost pressures among Maltese non-financial firms, even as pricing power remains constrained.
A net 41% of companies reported improving current conditions in the second quarter of 2026, up from 33% in the previous round. Near-term expectations also strengthened, with a net 49% of firms anticipating higher activity, compared to 42% before.
The construction and real estate sector led the expansion in activity. The wholesale and retail sector posted the most favourable outlook, followed closely by construction and real estate. Services and manufacturing remained broadly positive, though geopolitical uncertainty continued to cloud the short-term horizon.
The standout figure in this round is cost inflation. Some 86% of firms reported higher cost pressures, a significant jump. Yet the net balance of those raising selling prices rose only marginally, to 51%. Cost pressures surged to 86% of firms, yet only 51% raised selling prices, signalling a margin squeeze.
Investment intentions edged up, driven by capital expenditure, business expansion and diversification. Job creation remained positive, but hiring expectations moderated compared to the previous quarter.
For Maltese businesses, the data points to a classic margin squeeze: input costs are climbing faster than output prices. With geopolitical risks still elevated and hiring plans cooling, firms face a delicate balancing act between protecting margins and sustaining growth.
The Central Bank's survey also includes a special focus on the construction and real estate sector, whose continued strength since 2022 stands out against the broader backdrop of cautious optimism tempered by rising costs.