TIRANA, July 9- The ongoing political crisis which started beginning February has had a negative impact on the expectations of businesses and consumers. The Bank of Albania reported that the economic sentiment indicator (ESI) fell by 0.7 percentage points in the second quarter of 2019. The ESI level, at 105.8, continues to remain above its long-term average. Despite the improvement in confidence in the services sector, the decline of the ESI reflected the decline in confidence in the sectors of industry, construction, trade and consumer confidence. The economic sentiment indicator is a composite indicator made up of five sectoral confidence indicators with different weights, industrial confidence indicator (40 percent); construction (5 percent); services (30 percent); consumer (20 percent); and retail trade (5 percent).
The industry confidence indicator fell by 2.3 percentage points in the second quarter, but yet remaining by 3.2 percentage points above the historical average. The lowest level of the indicator is mainly attributed to the decline of the production balance by 6.1 percentage points, and to a lesser extent deteriorating its other constituent balance, the ordering contracts by 1.2 percentage points. The stock inventories slightly improved by 0.4 percentage points. A declining performance was also displayed by the financial situation, export-demand contracts and expectations for employment performance. In terms of output performance the industry sector businesses expect improvements in the upcoming quarter. The capacity utilization rate was about 0.3 percentage points lower than a quarter earlier and stood at an average of 76.7 percent.
The construction sector confidence indicator declined by 1.1 percentage points in the second quarter, but remains above its historical average. Despite the growth in the construction activity balance by 1.6 percentage points, the dynamics were determined by a 3.9 percentage points decrease of commission contracts. The financial situation and employment also recorded declines. The balance of expectations for future employment and capacity utilization rate increased during the quarter under review. The capacity utilization rate resulted about 66.8 percent.
The service sector confidence indicator increased by 2.8 percentage points in the second quarter and remains above its historical average. Its improvement reflected the growth of both the trade balance of the indicator, business performance and demand, by 3.2 and 2.3 percentage points respectively. The dynamics and expectations for demand and employment in the next quarter result in an upward trend. The employment balances, the financial situation and the capacity utilization rate dropped during the second quarter. However, service businesses result in using their capacities at an average rate of 78.3 percent, which stands at 2.9 percentage points above the same quarter’s previous year’s rate and 2.2 percentage points above its historical average.
The confidence indicator in the trade sector decreased by 1.3 percentage points in the second quarter and stands at about 5.6 percentage points below its historical average. The deteriorating dynamics of the indicator was determined by the drop of the business performance by 5.0 percentage points, at a time when expectations for employment performance in the next quarter, increased by 2.4 percentage points. The financial and employment situation in the quarter under review also declined, while expectations for business performance in the next quarter were improved. The capacity utilization rate also increased, both in quarterly terms by 2.1 percentage points and in annual terms by 0.7 percentage points.
The confidence indicator in the trade sector decreased by 1.3 percentage points in the second quarter and stands at about 5.6 percentage points below its historical average. The deteriorating dynamics of the indicator were determined by the drop in the business performance by 5.0 percentage points, at a time when the expectations for employment performance in the next quarter increased by 2.4 percentage points. The financial and employment situation in the quarter under review also declined, while expectations for business performance in the next quarter were improved. The capacity utilization rate also increased, both in quarterly terms by 2.1 percentage points, and by 0.7 percentage points in annual terms.
