Romania’s May PMI in positive territory for second month in a row

Romania’s seasonally-adjusted PMI index compiled by BCR bank within the S&P Global methodology, edged up to 52 points in May from 51.5 points in April.

It has thus remained for the second month in a row above the 50-point neutral benchmark, showing clear signs of recovery in the Romanian manufacturing sector after three months of below-neutral readings in January-March (and most of the year 2023).

The industry might thus make a positive contribution to the quarterly economic advance in Q2 (as opposed to Q1), PMI data for the first two months of the quarter suggests.

The manufacturing sector was most likely not a contributing factor to the economic growth in the first three months of the year (put at +0.5% q/q by flash estimates), as the PMI data below 50 for the first quarter suggests.

Manufacturing accounts for around 15% to 20% of the gross value added in Romania.

In May, all five components of the PMI index made positive contributionsto the overall deviation of the index from the neutral benchmark, placing themselves in the positive territory for the second consecutive month.

But the main drivers in roughly equal proportions and with stronger intensity were the new orders and the output that strengthened and the suppliers' delivery times that worsened in May to the strongest degree recorded so far (due to the Red Sea disruptions cited as the main reasons).

Speaking of demand (new orders and output), export orders remained in contractionary territory, albeit at a slower pace, showing that external demand remains weak, especially in Europe, and remains a drag for the Romanian manufacturing sector.

The employment component of the PMI index remained above 50 for the second consecutive month, however, the pace of improvement was only marginal. The number of job vacancies remains above the number of persons actively seeking jobs in Romania, indicating a tight labor market. Furthermore, there is also a problem regarding finding workers with the right skills for the job.

Finally, the quantity of purchases was up in May (which is positively correlated with the rise in new orders), but again making a smaller positive contribution compared to the previous month.

(Photo: Oleg Kachura/ Dreamstime)