RO: Weak sentiment indicators cloud recovery in industry

Industrial production increased by +0.4% m/m and moderated its annual decline to -0.9% y/y in October vs -3.6% y/y in September. Our forecast was for an improvement to -0.3% y/y.

2024 is likely to be the second consecutive year with a contraction in industrial production, estimated at -2.0% after -2.5% last year. We expect a recovery in industrial production by around 1% next year against the backdrop of mild acceleration in Eurozone economic growth. Domestic and external industrial surveys paint a bleak picture for Romanian manufacturing. Hence, the rebound is likely to be sluggish.

Mining was up +4.2% m/m and +2.0% y/y, manufacturing increased by +0.3% m/m and dropped -0.8% y/y, while energy production came at -0.8% m/m and -3.2% y/y.



Manufacturing output over the past twelve months is 5.7% below the similar period pre-Covid level. The contagion from weak Germany industrial sector weighs on the Romanian manufacturing given its heavy reliance on orders from abroad. Bottoming-out for domestic manufacturing is, at best, not in sight, with the risks to the outlook rather tilted to the downside.

BCR Romania Manufacturing PMI remained below the 50 no-change mark in November due to weak demand. The manufacturing component of the Economic Sentiment Indicator (ESI) declined in November on lower production expectations.

Sentiment among German manufacturing companies worsened in November according to the Ifo Business Climate Index. HCOB Eurozone Manufacturing PMI came at a two-month low in November with survey data indicating strong declines in new factory orders, production, purchasing activity and inventories.