The economic sentiment indicator in Albania continued its upward trajectory in August, marking a positive trend in the country’s economic outlook. According to the Bank of Albania, the indicator increased by one percentage point, placing it 12 percentage points above its historical average. This rise reflects growing optimism in several key sectors, though some areas still show signs of concern.

Why does it matter?

Economic sentiment indicators are crucial as they provide insights into the confidence levels of businesses and consumers, with a higher indicator suggesting that businesses and consumers are optimistic about the economy, which can lead to increased investments, spending, and overall economic growth. The economic sentiment indicator’s rise in August suggests a cautiously optimistic economic environment in Albania, driven by specific sectors’ growth, despite some ongoing challenges.

The rise in the economic sentiment indicator in August was primarily driven by increased confidence in the trade, industry, and construction sectors. The industrial confidence index, in particular, saw a notable increase of 3.4 percentage points, standing 11 percentage points above its historical average. This improvement was largely due to more optimistic business evaluations regarding new orders and current industrial production levels.

However, the sentiment was not uniformly positive across all sectors. The services sector experienced a decline of 5 percentage points, despite still being 14 percentage points above its historical average. This drop was attributed to less optimistic business assessments of current activity and demand levels. Expectations for future demand in the services sector also decreased, reflecting some uncertainty moving forward.

In contrast, the trade sector’s confidence index expanded by 6 percentage points in August. Businesses in this sector expressed positive views on current business performance and employment prospects. They also anticipated continued growth in the near future, with the indicator nearing its historical peak.

Consumer confidence also edged up, with an increase of 1.2 percentage points compared to the previous month. This rise was influenced by more optimistic expectations for the financial situation and the broader economic environment in Albania. Consumers were slightly more positive about making large purchases, reflecting improved financial stability and economic outlook.