Fall of business and consumer confidence on the Albanian economy

Fall of business and consumer confidence on the Albanian economy

IBNA Special Report

Tirana, April 17, 2015/Independent Balkan News Agency

By Edison Kurani

Businesses and consumers in Albania saw the economic situation in the first quarter of 2015 as gloomy, thus showing a low confidence in different sectors in the country.

An observation of the Bank of Albania for the period January-March, reflects the same situation in all sectors which have been surveyed, from industry to construction, services and trade.

According to the observation, the exploitation of production capacities fell in all the economy spectrum, from industry to services, leading to a loss of optimism in the market.

This is the first time that all sectors and consumers offer the same positioning in their reply.

Based on the assessment of businesses, the economic situation and their overall situation has been assessed as deteriorated during the first quarter of 2015.

Their indexes fell by 6,7% and 14,1% respectively.

Businesses have expressed a falling tendency of both domestic demand and foreign demand. Bank of Albania says that expectations for the second quarter are optimistic, in terms of the growth of exports and new orders.

The rate of the exploitation of capacities in industry resulted to be at a level of 67,7% in the first quarter, around 4% lower than the historical rate.

Prices of production have been estimated with a slight rise during the first quarter.

The index for new investments carried out by industry businesses during the last six months has improved. These investments continue to mainly focus on the purchase of new equipment and less in investments in structures.

Consumer confidence

The consumer confidence index (CCI) fell by 2,7% in the first quarter of the year, confirming a falling trend which started last quarter. The fall of CCI mainly reflected the deterioration of the index of big purchases, which fell by 9,2%. Consumer expectations on the economic and financial situation in the country also contributed in the deterioration of CCI. On the other hand, the index of expenses/revenues saw a slight improvement during the quarter in question, having a positive impact on CCI.

Consumers consider the financial and economic situation in the country in the first quarter of the year as deteriorated. Their expectations for the rate of unemployment in the next six months are pessimistic. This index grew by 1,1% (the increase of the index indicates a growth of expected unemployment). Also, consumers perceive an increased cost of living, while the index of savings has seen a slight fall. Expectations for inflation after a year went down in the first quarter  to 1,4% from 1,8% in the previous quarter.

The index of economic sensitivity

The index of economic sensitivity (IES) fell by 4,6% in the first quarter of 2015. This fall stopped the rising tendency registered since the fourth quarter of 2013. The level of IES remained above the historical average during the three previous quarters and currently it is 0,5% under the long-term average. The fall of IES in the first quarter was determined by the fall of confidence in all sectors of economy and the fall of consumer confidence.

The industry sector

The index of industry confidence (IIC) registered a fall in the first quarter of the year for the second quarter in a row. The 3,2% fall of IIC was mainly caused by the fall of the production index (by 8,5%). The fall of the index of the financial situation gave a smaller falling contribution (the index fell by 1,3%), while the situation of stock remained almost unchanged as opposed to the first quarter. In spite of negative developments in the last two quarters, the level of the index remains above the long term average and over the average for the period 2008-2014.

Construction sector

After a gradual increase during 2014, the confidence index in the construction sector (CIC) stopped its rising trend in the first quarter of 2015 and fell by 2,4%. The fall of CIC during the first quarter was affected by the fall of demand and fall of production. The index of the situation with employment saw a slight increase, positively contributing in the aggregated index.

The service sector

The service sector confidence index (SCI) stopped its growing tendency in the first quarter of 2015 and fell by 2,4%. The fall of SCI was caused by a deterioration of the index of the general situation of business and financial situation. The balance of demand has remained unchanged as opposed to the previous quarter.

The trade sector

The confidence trade index (CTI) fell by 4% in the first quarter of 2015. The deterioration of CTI was affected by a deteriorated assessment by businesses over their financial situation and the general situation of businesses. The respective indexes fell by 10,8% and 6,7%. The third component of CTI is the situation of employment, which increased in the first quarter of the year.

Businesses in the sector of trade have evaluated the general situation of economy in the first quarter of the year as falling. The respective index fell by 6,9% as opposed to the last quarter of 2014. At the same time, the evaluation for the demand has fallen by 7,9% in the quarter in question. In line with the weak demand and the deteriorated situation of the business sector, trade businesses have evaluated the prices of goods in this sector as falling. The rate of the exploitation of capacities in trade in the first quarter was 75,8%, 3,3% lower than the one marked last quarter and 3,4% lower than the average of the past four years. /ibna/