RO: BCR Romania Manufacturing PMI at 48.3 in April
There was a more moderate rate of contraction in the BCR Romania Manufacturing PMI in April. The headline index went up to 48.3 from 46.9 in the previous month on the back of a positive directional contribution from all 5 components. The noisy start of the year full of both domestic and global events has most likely affected the domestic manufacturing business so far this year. The evolution of external demand remains crucial for any meaningful recovery in the sector. The HCOB Flash Germany Manufacturing PMI inched down in April to 48.0, indicating that all the uncertainty surrounding tariffs is affecting Romanias biggest trading partner.
Based on PMI readings we should expect that industry will not be growth supportive in the first quarter of 2025. Official industrial output that data from the National Institute of Statistics for the first two months of the opening quarter paints a similar story. The expectations continue to be that industrial output will regain its growth momentum in 2025, after two consecutive years of contraction. External demand should play an important role. Significant investments in EU security, along with large fiscal stimulus approved in Germany for infrastructure and defence spending, are likely to boost European industrial production. The uncertainty remains high, especially in the context of the announced U.S. tariffs. Romania is mostly indirectly exposed to U.S. tariffs through German car industry supply chains.
The output sub-index remained below the 50.0 neutral mark for the eleventh month in a row in April. Unfavourable economic conditions and poor demand remain the main points of concern for Romanian manufacturers. New orders decreased again in April and stretched the streak of contraction to ten months. Weak demand has been partly linked to higher prices charged based on this months responses. The lack of interest from international customers was the issue reported by the surveyed firms as the reason for another month of contraction of new export orders in April. Confidence regarding future business weakened in April, though remained well within the growth expectation threshold, as manufacturers in Romania displayed concerns about inflation and the general evolution of the economic and political environment. Access to European funds, expansion plans and hopes of an improvement in demand conditions are reasons that kept manufactures optimistic.
The employment component continued to indicate contraction in April mainly a result of leavers and redundancies, based on the responses given. The contraction in backlogs of work accelerated in April, indicating that the need for work is currently low and this coincided with a softer reduction in stocks of finished goods. Soft demand continues to be reflected in the quantity and stocks of purchases.
Input prices continued to rise in April, though with the rate of inflation decelerating for the second month in a row. There were mentions of increased supplier price lists as well as higher raw material and energy costs. In some cases, panellists linked inflation to tariff uncertainty. Output prices had a similar evolution, as the rate of inflation also eased compared to the previous month.