RO: Pleasant surprise from industrial production in April
Industrial production surprisingly advanced by +2.3% m/m and moderated its annual decline to -2.4% y/y in April from -6.3% y/y in the prior month. This comes above Bloomberg consensus and our call. Industrial production has been very volatile in recent months and readings have been decoupled from sentiment data.
We think that industry could return to growth later this year, with an estimated increase of +1.1% in 2025 with some downside risk. We see positive effects on local manufacturing from increased defence and infrastructure spending in Germany, offsetting the tariff war between the US and other countries. Confidence indicators are mixed, with easing contraction rates for local and European manufacturing.
Mining was down -0.8% m/m and -3.4% y/y, manufacturing inched up +2.9% m/m and was down -2.9% y/y, while energy production increased by +0.1% m/m and by +3.0% y/y in April.
BCR Romania Manufacturing PMI recorded the second consecutive month of improvement in May reaching 48.5 from 48.3 in the previous month. Even though it remained below the 50 neutral mark which still indicates a contraction, the trend appears to be promising. Mays directional improvement of the PMI was mainly driven by the output component.
Manufacturing confidence decreased in May vs April according to the Economic Sentiment Indicator on shrinking production expectations.
Manufacturing component of the Ifo Business Climate Index for Germany improved significantly in May. Companies revised their expectations noticeably upward. They also assessed their current situation as somewhat better. Order intake stabilized.
HCOB Eurozone Manufacturing PMI increased in May to a 33-month high but remained in contractionary territory providing evidence of recovery in European industrial sector.
New orders in manufacturing strengthened in the second half of 2024 but the annual growth rate was negative in January-February 2025. The annual growth rate returned in the expansion territory in March.