RO: Manufacturing hit by political turmoil
The BCR Romania Manufacturing PMI ends 2024 at the lowest figure on record. At 46.4 in December 2024, the headline index shows the sharpest contraction in monthly terms of the manufacturing sector in the 18-month survey history. Record low new orders were the main contractionary factor this month. Output, employment, and stocks of purchases indexes were also lower in December compared to the previous month. Muted demand conditions linked to a combination of political instability, budgetary constraints at clients and lower customer interest were the problems reported in the context of lower new orders numbers. The current global climate remains unfriendly for Romanian manufacturing exports. The flash HCOB Germany Manufacturing PMI came lower in December vs November and remained well below the 50 neutral level.
The average PMI for the full year stands at 48.6 and Romanian manufacturing output most likely will record a second consecutive year of contraction. The 2024 Q4 PMI average is also lower compared to the previous quarter, which could mean a negative contribution from industry to GDP growth in the last quarter of the year. In 2025, Romania manufacturing might see growth, contingent on external demand. However, the nation's manufacturing sector struggles with structural issues due to its peripheral position in the value chain. The dip in demand is likely due to both reduced international economic growth and the scarcity of high-value products produced at Romanian factories.
The Output Index remained contractionary in December, with weak incoming new orders reported as the main problem. Regardless, morale among Romanian manufacturers remained high in December with over half of the respondents expressing optimism. Some of the respondents were hopeful that market conditions will improve, while others are expecting past investments to begin to positively affect output. The sluggish demand continues to also affect employment numbers with the index posting below 50 for a seventh month running.
Input prices continued to increase in December, as has been the case since data collection began. Panellists frequently cited upward revisions to suppliers' price lists in their reports. Output prices continued to rise as well but by a lesser margin. Building up upward pressure from past input prices hikes will most likely keep output prices on an upward trend as well.