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Industrial barometer: in January, the industrial activity continued to drop


The indicator for the volume of production dropped to 35 points against 55 in November and 42 in December 2016. For two months, the activity has been under 50 points, in full contraction.The indicator for stocks dropped from 43 in December to 39 in January, sign that the sales from the stocks are higher than the rate of refilling the stocks.

At the same time, starting with November to January, the indicator for production costs went up from 58 to 65 points, probably due to the expenses with energy. Now the indicator is at the highest level from the last 27 months, and the percentage of the companies which report the growth of thecosts is over 5 times higher than the percentage of those who have drops. Usually, the growth of costs for a period of 3 months in a row is an early sign of inflation and transfer of the costs on distribution and purchases.

The main cause of the decline in activity is the continuous drop of demand over the last five months. The indicator for new orders dropped from 60 points in September to 35 in January. For two months, the demand dropped under the threshold of 50 points which separates growth from contraction.

However, there is a slight coming back in the sector of exporters. The indicator for order to export increased from 48 in December to 53 in January. Imports of raw materials and materials decreased from 50 to 51 due to the production necessities of the exporting companies.

Probably due to exporters, the indicator for non-executed orders increased from 41 in December to 53 in January. When the demand as a whole drops persistently, a temporary growth of the non-executed orders can signal a deficit of capacity, eventually due to seasonal causes.

Finally, the percentage of indicators with negative values in the total of the indicators measured by the barometer dropped from 90% in December to 65% in January.

Besides the positive signs, a prolonged decline of the activity, of two-three months, cannot be without consequences. As a direct effect, the indicator for the number of employees dropped from 51 in November to 45 in December and 43 in January. The companies give up a part of the employees although the rhythm of layoff was smaller in January than in December. The slowing down in the rhythm of layoff as the demand was reduced shows that the managers either expected to restart work or have smaller possibilities to adjust the work force to the economic circumstances.

Another effect of the decline could be felt at the level of the economy. It is probable enough that the reduction of the activity could affect the economic growth in 2017, if there does not intervene a major recovery.

In any case, the managers stay optimistic. The indicator of optimism, calculated as an average of the hopes cumulated regarding orders, production and prices over 6 months grew a little, from 64 in December to 67 in January. The expectations matter in the economy. Trust can be itself a factor for the beginning of recovery.The industrial barometer in Romania is made by IRSOP &SNSPA – the Management Faculty, on a sample of 300 industrial companies, representative at the level of the 15,200 industrial companies with over 9 employees in Romania, which generate approximately 95% of the turnover in industry.

The data were collected through direct interviews with the managers of the companies in the interval 15-17 February 2017.