Construction cost continues increasing

TIRANA, May 24 – Construction costs continue increasing despite the crisis this important sector to the Albanian economy has been suffering since the last quarter of 2009.
The construction cost index rose 0.2 percent year-on-year during the second quarter of 2010 and 0.2 percent compared to the previous quarter, recent data published by the Institute of Statistic shave shown. One year ago the change was only 0.04 percent. Compared to the first quarter of 2010, direct expenditure rose by 0.3 percent while material expenditure by 0.4 percent.
Construction and electrical material prices rose by 0.3 and 0.5 percent, respectively compared to the previous quarter. Transport and machinery expenditure also rose by 1.4 and 0.2 percent, said INSTAT.
The Construction Cost Index calculates the difference of expenses in construction considering the change of basic input prices such as construction materials, construction vehicles and equipment, expenses for employees.
Central bank surveys show the construction confidence index increased by 3.7 percent during the second quarter but remained 8.9 percentage points below its long-term average. Its improvement was mostly caused by the increase in demand by 7.6 percentage points and the production and employment balances, which rose by 2.8 and 0.7 percent respectively, but remained negative. Companies said informal economy and lack of construction permits were the biggest obstacles to their normal activity.
The capacity utilization rate in this sector remained 69 percent, 3.3 percent more than the first quarter and 0.8 percent above its historical average.
Construction companies expect negative developments for the third quarter despite the increase in demand. Production prices are also expected to increase.
The construction sector continued its poor performance even in the first three months of this year, dropping by 21.1 percent year-on-year and 4.3 compared to the last quarter of 2009.
Construction was also the hardest hit in the last quarter of 2009, recording a 14.4 per cent drop compared with same period of 2008 and an 11.8 per cent decrease from the third quarter of 2009.
Construction has been one of the most dynamic sectors in the country contributing to more than 10 percent of the GDP in the past years and employing 18 percent of people working in the private sector.