RO: Consumer confidence climbs to three-and-a-half year high

Economic Sentiment Indicator (ESI) was unchanged at 105.7 in November vs October. Business confidence declined in manufacturing and services, was almost unchanged in construction and improved in retail trade. Consumer sentiment jumped ahead of elections. Average ESI for October-November is 105.7, well above 103.6 in the third quarter.

Higher selling prices expected by companies in all sectors covered by the survey along with higher consumer prices anticipated by households for the next twelve months cloud the disinflation process.

We estimate economic growth at +0.8% in 2024 and +2.8% in 2025 with risks to the downside for the next year due to a widely expected gradual shift to prudent fiscal and income policies. Households consumption is likely to lose speed on slower growth in real income, while investments could receive some support from inflows of EU funds.

Manufacturing confidence came at -0.1 in November vs 0.7 in October on lower production expectations. According to the bi-annual investment survey conducted in October/November, the share of managers expecting an increase in investments in manufacturing in 2024 was higher than the share of managers expecting a decline, resulting in a balance of +2%. The balance of opinions about investments in 2024 was lower in October/November than in the previous survey conducted in March/April. The balance of answers for 2025 is positive at +8%, suggesting an acceleration in investments.

Services sentiment dropped to 7.4 in November from 8.6 in October on weaker demand over the past three months and flat demand expected for the next three months.

Consumer confidence came at -8.9 in November vs -12.1 in October, the highest level since the post-Covid recovery in mid-2021. Financial situation of households over the past twelve months came close to all-time high after strong increases in pensions and wages. On a less positive note, future financial situation deteriorated slightly.

Retail trade confidence increased to 12.6 in November from 12.3 in October as past business situation was assessed as stronger in contrast to a decline in expected business developments.

Construction confidence was little changed at -6.1 in November vs -6.0 in October.

Selling price expectations firmed in all business sectors covered by the survey manufacturing, services, retail trade and construction.

Consumers price expectations for the next twelve months picked up in November, while their perception about price developments over the past twelve months declined as households likely became aware of the actual drop in inflation from double-digit levels to mid-single digit territory.