TIRANA, March 5 – Apart from falling sales due to a drop in domestic purchasing power and lower external demand, Albanian producers are also facing higher production costs. Latest INSTAT data show producer prices continued their rising trend even in the final quarter of 2012, rising by 0.3 percent compared to the third quarter and 0.1 percent year-on-year. INSTAT data show the Producer Price Index (PPI), measuring price changes from the makers of a product, rose by 0.6 percent y-o-y for the extracting industry and dropped by 0.1 percent for manufacturing industry. Producer prices in the production, distribution of electricity, gas and water rose by 0.4 percent. Meanwhile, the PPI for domestic products rose by 0.1 percent compared to the third quarter of 2012 with producer prices in the processing and extractive industries up by 0.1 percent and 2 percent respectively. The export price index also rose by 0.8 compared to the previous quarter with prices in the processing industry which accounts for the majority of Albanian exports up by 1.1 percent.
Construction costs
Construction costs registered a slight increase even in the final quarter of 2012 when they rose by 0.5 percent year-on-year and slightly dropped by 0.1 percent compared to the previous quarter Data from the country’s Institute of Statistics (INSTAT) show the slight increase in the construction cost index was a result of higher expenditure on machinery and transport which rose by 2.8 percent and 2.4 percent respectively, while expenditure on construction material and payroll dropped by 1.6 percent The Construction Cost Index calculates the difference of expenditure in construction, taking into consideration the change of basic input prices such as construction materials, construction vehicles and equipment, as well as expenses for employees.
Fuelled by a sharp drop in demand for new apartments, the house price index registered another sharp shrink in the final quarter of 2012. A report published by the central bank shows apartment prices in Tirana dropped by 11.9 percent in real terms in the final quarter of 2012. Rents also dropped by 14.5 percent (inflation adjusted) in the final quarter of 2012.
One of the key drivers of the Albanian economy until 2008, the construction sector has been continuously shrinking in the past three years due to lower migrant remittances, and tighter lending standards. INSTAT data show construction accounted for 11 percent of the GDP in 2010, down from 15 percent in 2008. The construction industry has been the worst performing sector in the first half of this year.
Reports show citizens are becoming more reluctant to buy new apartments because of falling revenues and especially a sharp decrease in immigrant remittances.
