Description

Firms report that their performance has lost dynamism with respect to the first quarter of this year, although showing heterogeneity across sectors and the country’s regions. This is the result of a decrease in sales combined with rising costs. The firms continue to report difficulties in transferring their costs to final prices, which are described as stable.

Gaps continue to be perceived in the labor market, with still stable staffing and a slight drop in the share of firms that have looked for new workers during the last quarter. At the same time, the proportion of firms reporting difficulties to fill positions has declined. Although the share of respondents that report having laid off workers is stable, the proportion that give their dwindling sales as the main reason for the layoffs has increased. 

The firms continue to perceive that financial conditions are tight. This is influenced by the perception that banks have increased their collateral requisites and high interest rates. About a quarter of the firms report having applied for loans during the last six months. Of these, more than 70% say they obtained approval for the requested credit, although the lending conditions vary among firms. Slightly more than 20% reported worse than expected terms but took the loan anyway. For their part, the banks do not report any substantial changes in their credit conditions in the recent past. However, they do mention that significant differences exist based on the profile of each client, associated with elements such as the level of the financial burden and the business sector of each firm.

In the short term the firms expect no substantial change in their sales levels, their prices or input availability during the coming quarter. However, they expect a new rise in their costs, as they factor in a projected increase in labor, input and fixed costs. In any case, the expectations of the interviewed firms again point to a partial or deferred pass-through of costs to final prices.

Pointing to the next half year, the share of firms that expect to apply for a loan is down from what they reported last February. Among the reasons for not requesting them, it is worth mentioning the financial burden of some firms or their not having the capacity to take on debt, while fewer firms state that they do not need funding at the moment. 

The firms foresee a somewhat improved performance in the next twelve months. Still, this represents a drop in the expected performance compared with the last survey, when a stronger rebound was expected for the year ahead.