The Purchasing Managers’ Index (PMI) compiled by BCR Romania for the manufacturing sector plunged to 47.6 points in October – the weakest reading in seven months – dragged down by the deterioration in the volume of new orders and volume of actual output. The decline wipes out the progress seen over the past six months, which brought the index to 49.8, close to the neutral 50-point benchmark.
The degree of optimism in business expectations fell to the lowest point since data collection in October. Companies were concerned that lower purchasing power, which was eroded by persistently high inflation and slower nominal wage growth, would dampen sales, according to Erste Group.
The most concerning aspect comes from new orders, which dropped sharply after breaking the 50.0 barrier for the first time in 15 months in September, analysts at the Austrian financial group point out.
Based on answers from the surveyed companies, rising prices and subdued customer budgets were behind this negative evolution. New export orders followed a similar pattern, showing that external demand was also a problem.
Industrial production data published by the statistics office INS already indicated a decline of manufacturing activity in August – quite interestingly, well below the PMI, putting in question the early warning capacity of the index compiled by Erste Group. Romania’s industrial output volume index contracted by 3.3% y/y in August, after it boosted positive annual growth rates over the previous three months, according to data published by the statistics office INS on October 15.
The deterioration in the industrial output sub-indicator of Romania’s PMI index, during October, comes amid rather positive new orders data reported by the statistics office INS, Erste Group notes. However, the new orders indicator reported by INS deteriorated in August (-4.9% y/y) after annual growth rates of above or close to 10% y/y in May-July.
According to the 12-month moving average, the new orders were still up 5.2% y/y in August, Erste Group reports – hinting that the industrial activity should have accordingly gained ground in the months ahead.
iulian@romania-insider.com
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