In January 2025, the economic sentiment indicator decreased by 0.8 points. Despite this decline, the indicator scored around 6 percentage points above the long-term average, the Bank of Albania said on Monday in the Business and Consumer Confidence Indicator Survey.

According to the central bank, the fall in the economic sentiment indicator was the result of weaker confidence across all sectors, except services. This sector provided a positive contribution to the aggregate economic indicator for January.

The Industry Confidence Indicator continued the downward trend since the third quarter of 2024, down by 4.7 percentage points in January. Nonetheless, the Industry Confidence Indicator remains at around 2 percentage points above the long-term average. The ICI fell as businesses’ appraisals on order books, particularly those relating to exports, were more pessimistic. The assessments on the current situation of industrial production have remained almost unchanged compared to the previous month. Inventories have gone slightly down according to businesses’ assessments, after increasing in the previous two quarters. Expectations for prices in the future have declined somewhat compared to last month.

Furthermore, the Construction Confidence Indicator declined by 4.1 pps in January 2025. However, it remains considerably above the historical average. BCI fell as businesses’ assessments on current construction activity were revised down. On the other hand, their assessments on order books were slightly up this month. In the meantime, expectations for employment and prices in the future increased.

The Services Confidence indicator rose by 4.4 pps in January. This indicator stands 13 pps above the historical average. The SCI increased due to businesses reporting better assessments of the current performance of their activity and the current level of demand. Likewise, expectations for employment in the future increased.

Meanwhile, the Trade Confidence Indicator dropped by 2.9 pps in January 2025. TCI stands around 4.1 pps above the historical average. The more pessimistic assessment of businesses on their current performance was the main factor behind the decline in the Trade Confidence Indicator. Contrarily, expectations for future employment have continued to increase over the month. And expectations for prices in the future were revised down.

On the other hand, the Consumer Confidence Indicator declined by 3 pps in January, driving the indicator below the historical average for the first month since June 2024. The fall of the Consumer Confidence Indicator in January 2025 reflected the weaker developments in all its constituent components. So, expectations on the overall economic situation, their financial situation in the future, and major purchases have all been revised down, whilst consumers increased their expectations for prices in the future.

The Confidence Index is constructed for each sector and is calculated as the simple average of seasonally –adjusted balances of indicators that have the highest correlation with the reference series. The Economic Sentiment Indicator is constructed based on the same balances used for constructing confidence indicators for each sector (industry, construction, services, trade, and consumers), aiming to capture the domestic economic activity. Before aggregating the Economic Sentiment Indicator, these balances are standardized and weighted.