RSS
Industrial barometer: strong contraction in industry at the end of the year
Activity in the industry dropped significantly in the last month of last year but the indicator of trust of the managers increased significantly in December from 63 in November to 67 according to the Industrial barometer made by IRSOP and SNSPA.
‘In December,the activity in industry dropped significantly. The growth was stopped and the activity went into contraction. Similarly it happened at the end of 2015 and 2016. If the model is kept, in January and February 2018 the industry will remain in the same stage of contraction, with a possible recovery later. However,the managers are optimistic, and the expectations for the next 6 months increased, despite weak activity, every month,IRSOP and SNSPA ask a sample of managers if in their company the production, the orders, the stocks, recruitment and other parametres increased or decreased against the previous month. An indicator based on the net report of the answers show the expansion if it goes above 50 points and contraction if it goes under 50’ the barometer authors show.
According to the barometer, the volume of production dropped in December to 44 points, from 62 in November. The authors remind the fact that from 50 points upwards is the expansion area and under 50 is the contraction area. The stocks, almost under-dimensioned dropped from 45 in November to 42 in December. The rate of restocking with goods and materials is sensibly lower than the rate of usage.
According to the barometer, the costs of production went down with 4 points from 72 to 68 on the basis of the reduction of activity. However, the indicator is over the year average, without December.
‘The indicator of optimism of the managers increased significantly from 63 in November to 67 in December. The value of the indicator results from the collection of the discrete expectations of the managers regarding demand, production and future income. At first sight, it could seem bizzare. The activity drops dramatically, in exchange, the trust of the managers grows in future performance. However, for us who have measured these indicators for three years, the correlation is not a surprise. Every time when the performance drops, the trust of the managers is going to grow. There are two probable explanations. On the one hand, trust relies on information and certainties which the managers have in connection with the level of orders and activity in future months. On the other hand, the increase of the trust when things go wrong may be a psychological reaction to annul difficulties, to re-establish subjective comfort. Both processes may act at the same time’ the Industrial barometer shows.
The Industrial barometer presents the activity in industry in December 2017 and appears in almost 20 days after the closing of the analysed month. The barometer is made by IRSOP&SNSPA Facultatea de Management on a sampe of 344 industrial companies, representative at the level of the 15,200 industrial companies in Romania, with over 9 employees, which generate approximately 95% of the total of the industry turnover. The data were collected through direct interviews with the managers of the companies between 17-19January 2018.