RO: Industry to rebound partially in 2025

Industrial production dropped -0.6% m/m and -1.3% y/y in November and fell short of our expectations and market consensus, both at -0.4% y/y. In January-November industry dropped -1.6% y/y.

We think that industrial production may resume growth this year following contractions in 2023 and 2024. Our forecast for industry growth is +1.1% against the backdrop of slight acceleration in Eurozone economic growth. Domestic and external industrial surveys paint a bleak picture for the Romanian manufacturing and the recovery is likely to be slow.

Mining dropped -5.0% m/m and -3.4% y/y, manufacturing fell by -0.7% m/m and -1.2% y/y, while energy production was up +2.4% m/m and decreased by -2.2% y/y.

Sectors exposed to recent increases in minimum wage like textiles and wearing apparel dropped sharply in November. Some medium-high-tech industries like electric equipment and machinery and equipment were up in annual terms in a positive sign.

Manufacturing output over the past twelve months is 5.4% 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.

BCR Romania Manufacturing PMI ended 2024 at historical low. Muted demand 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.

Manufacturing confidence dropped to a four-year low in December according to the Economic Sentiment Indicator due to shrinking order books and sharp drop in the expectations component. Local political turmoil and pan-European weakness in business sentiment affected manufacturing confidence at the end of the year.

Mood among German manufacturing companies worsened in December according to the Ifo Business Climate survey. HCOB Eurozone Manufacturing PMI shows that European industrial sector ended 2024 in contraction.