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Barometer: Industry slowed down in May
Romanian industry has been slowing down, which is an alarming sign, considering that summer is coming, a period when recovering increase is almost impossible, according to the monthly industrial barometer made by IRSOP and SNSPA and released on Tuesday.
The drop of activity was obvious for two months on a row, stronger in April against March and lighter in May against April, according to the report. Each time, activity dropped for all indicators measured by the barometer.
“When indicators fluctuate independently, risks for industry are generally small. But when most indicators go down together there is a situation which signals high risks. Losing impetus is an alarming sign because of the coming summer months when activity drops and recovering lost increase is almost impossible. Moreover, the managers’ confidence is melting away. Their expectations for the following months have reached the lowest level this year,” the report shows.
Output level dropped to 59 points compared to 60 in April and 65 in March. The increase remains positive, but it is lower than in May 2017, while a two months drop suggests a more substantial drop than the level of domestic and foreign demand.
“Stocks started to decrease, on the background of fewer orders and lower output. The indicators dropped from 50 to 47 points in the contraction zone,” according to the report.
New orders dropped from 59 to 58 points, an apparently small drop, but its persistence creates high risks, specialists warn. Industry may producer less in the months to come, but on the other hand, no other factor erodes the managers’ confidence as much as order decline.
“Orders for export have dropped drastically, from 55 in April to 52 in May. Exporters have bigger problems than in the same period of 2017. The average indicator for export order in the first 5 months of 2018 is 55 compared to 60 in the same period of 2017. The drop is alarming enough and can be associated with the slowing down of the increase rate and demand in the euro zone,”the report shows.
At the same time, raw material imports grew from 57 in April to 61 in May, when more exporters and non exporters imported more.
Specialists warn that the number of employees reached the lowest threshold of the expansion area - to points, the result being predictable, based on the 2016 and 2017 pattern.
“In summer, industry fires a number of employees because of dropping season influences on output. If a new order boom fails to appear, we can expect the drop of the indicator for the number of employees to the contraction zone of less than 50 points in June-August,” the report shows.
In these conditions, the managers’ optimism index dropped from 66 in April to 63 in May, the index value resulting from the aggregation of the managers’ distinct expectations about future demand, output and incomes.
“The managers’ confidence dropped for domestic and foreign orders, the output volume and raw materials. The effective drop of activity in May against April, accompanied by the drop of the managers’ future expectations suggest there are few chances to see a spectacular boost in the months to come”, the report shows.
The report was made by IRSOP and SNSPA, the Management Faculty on a sample of 300 industrial companies, representative at the level of 15,200 industrial companies with over 9 employees in Romania, which generate about 95% of the total business figure in industry. Data were obtained by direct interviews with company managers over June 19-22, 2018.