Industrial Barometer September 2017: Activity grew in industry without managers’ optimism

Activity in industry visibly invigorated in September. Most indicators measured (7 out of 11) show increases, sometimes substantial ones. Bigger activity influenced the growth of production costs and the expansion of raw material imports. But company managers’ optimism did not increase.

Every month, IRSOP and SNSPA ask a sample of managers if their company output, orders, stock, staff hiring and other parameters have grown or dropped compared to the previous month. Am index based on the net ratio between answers show expansion if it is over 50 points and contraction if it drops below 50.

Output

* Output volume shows a significant growth from 56 to 64 points and a return to the peak recorded in March.

* Stocks went up shyly from 41 to 43, but remained in the contraction area (under 50).

Demand

* New orders progressed from 55 in August to 62 in September. An important advance, maybe on the background of the end of summer holidays.

* Orders for export went up the highest. From a low of 46 points in August to 59 in September. However performance is still modest compared to 69 in March and 64 in May.

* Raw material imports went up from 53 in August to 61 in September, 3 points over the January-August 2017 average.

Labour force

* The occupation rate indicator remained on the threshold between expansion and contraction - 51 points, compared to 52 in August. Higher activity in industry will be probably achieved with the same number of employees, at least on a short term.

Costs and incomes

* Production costs have grown sensibly in the last 3 months, from 58 in July, 63 in August and 69 in September. We notice a higher increase of the cost indicator (69) against the indicator measuring the production volume (64). So costs grow quicker than production.

* Prices received by firms for their products and services are just a point over the August score, 58 versus 57, the previous month. While costs seem to go up, incomes tend to stagnate.

Investments

* Investments of capital went up from 52 in August to 56 in September. Maybe the sudden relative intensification of activity creates some pressure which determines companies to allocate funds for equipment renewal or capacity expansions.

Expectations

The optimism index is 59 compared to 60 in August, below the January-August  average of 63. The index value results from aggregation of the managers’ distinct expectations concerning demand, production and future incomes.

Confidence in the future can be relatively insensitive to current activity changes. Maybe the managers’ expectations are mostly influenced by factors outside the activity of companies they run. On the other hand, a more intense activity does not produce confidence in the future unless the rate maintains at least 3-4 months on a row.

The next issue: November 2017 with the situation of October 2017.

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