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Industry barometer in Romania: August dark month - Industry in contraction area for all indicators

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Industrial output in Romania was in contraction in August, while in June and July is was close to zero increase and production costs suddenly went up, according to the monthly industrial barometer made by IRSOP and SNSPA and released on Thursday.

As of 2014, every month, IRSOP and SNSPA have asked a sample of managers if in  their company production, orders, stock, employment and other parameters have grown compared to the previous month. An index based on the net report between answers shows expansion if it gets over 50 points and contraction is it drops under 50. 

Output volume dropped from 52 points in July to 48 in August.

“Slipping in the contraction area, under 50 points, took place twice in the first 8 months of the year, in January and now in August. The January drop showed that after the shock, the increase remains modest and unstable,” the press release shows.

At the same time, stocks remained in the contraction area at 45 points compared to 46 in July.

New orders contracted to 45 points, while export orders contracted more, reaching 43 points.

Raw materials imports dropped inevitably on the background of dropping exports and lower domestic demand. It is the second time this year that imports contract because unfavorable prospects of future activity.

As for labour force, the number of employees has been in contraction since April and contraction extends and increases. The index reached 44 points in August.

Production costs grow even if activity slows down.

“In August the indicator showed 66 points, in expension by 4 points against the previous month. Price increases may be caused by the autonomous price increase for imports and the rise of real salaries in industry, the report shows.

Prices are also in the growing area to 55 points stationary against July.

The managers' Global confidence indicator has grown a little at 55 points compared to 52 in July but are far from the 70 points it had in January 2019.

“Optimism is generally growing based on the so-called adaptive expectations. Managers know economic cycles and season dynamics.  After a draughty summer, a healthy return is expected the following months”.

Sometimes predictions confirm, other times they don't. If exports do not recover, maybe industry will not get out of the contradiction too soon, according to specialists.

The Industrial Barometer is made by ORSOP and SNSPA Management Faculty on a sample of 300 industrial companies representative at the level pf the 15,200 industrial firms with over 9 employees in Romania, which generates about 95% of the overall business figure in industry.

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Friday, October 4, 2019