Industry barometer reveals Romania's industry partially recovered in Sept., yet future uncertain

Romania's industry partially came out of depression in September 2019, but the mood among the companies has not changed significantly as against August, although managers seem to be a little more optimistic, according to the Romanian Industry Barometer released on Thursday. 

According to the survey, the rebound was due to domestic demand rather than export orders, given that the export seems feeble, probably due to a slowdown in manufacturing in Germany and other Western countries. 

The impact of industrial activity on inflation and the labour market remains negative. 

In terms of production, the barometer shows that its volume came out of contraction and rose to 58 points in the growth area. This level had not been reached since May. Stocks increased slightly to 47 points, but for several years they had been almost constantly in contraction. 

New orders also rebounded, with the indicator having increased from 45 in August to 58 in September. Growth is mainly supported by domestic demand, which probably intensified as summer holidays came to a close. Instead, export orders were lagging. In August, they were contracting to 43 points and in September they rose only to 50, that is up to the border between contraction and expansion. However, imports of raw materials increased more vigorously, from 49 in August to 56 in September. 

The number of employees continued to remain contracted at 48 points compared with 44 in August. In the last 12 months, the average employment indicator has fluctuated around 47 points within the contraction zone, which means that in the last year the industry did not create new jobs. 

In terms of production costs, they remain high. In September, the indicator was at 66 points in the expansion area, as in August. The high costs partly explain the low rate of labour supply in the industry and could be related to keeping inflation above the desirable level. 

Prices charged by companies for their products fell slightly from August, from 55 to 52, probably because of exports dropped, which prices are higher, and the share of domestic orders increased, where prices are lower. 

"The overall indicator of managers' confidence improved slightly, rising to 58 points from 55 in August, probably amid the confirmation of adaptive expectations, in the sense that the managers expected the activity to increase at the end of the holiday season, which happened in September. Confirmation of the short-term expectations produces an increase of confidence in the long-term developments," according to the findings. 

Since 2014, the IRSOP pollster and the National School of Political and Administrative Studies (SNSPA) ask monthly a sample of managers whether in their company production, orders, stocks, hires and other parameters have increased or decreased on a monthly basis. An index based on the net ratio of answers indicates expansion if it exceeds 50 points and contraction if it drops below 50. 

The Romanian Industry Barometer survey is conducted by IRSOP and SNSPA Management Faculty on a sample of 300 industrial companies representative for the 15,200 industrial companies with over nine employees operating in Romania that generate about 95 percent of the total industrial turnover. It is a monthly barometer reflecting the up-to-date situation in the industry.