Romania’s PMI index falls in July on all components but inventory

The Romania Manufacturing PMI index, calculated and published by BCR Erste Group, deteriorated to 48.4 in July from 48.7 in June as all the components but the inventory (stocks of purchases) made a weaker contribution in the month.

Demand (new orders) component returned to its 1-point negative contribution seen a year ago, after the deep plunge in November-January, followed by unexpected improvement in April-May. The output component made a smaller negative contribution over the past three months (May-Jul), though.

The improvement trend in the headline PMI index was curbed in July by the announced domestic fiscal consolidation measures and weaker external demand, Erste Group explains.

However, the contribution of the main component – new orders – had already deteriorated earlier in June after reaching the past year’s high in April-May. The advance of the headline PMI index in June was rather misleadingly driven by the inventory (stock of purchase) and less active job cuts, while the output and new orders have both deteriorated.

The industrial output contracted for the fourteenth consecutive month in July, according to the PMI subcomponents, though the rate of contraction was softer than the historical average.

The contraction in new orders was mainly driven by weaker domestic demand for the third consecutive month, while external demand unexpectedly deteriorated as well.

The overall bleak picture was completed by continued job shedding, though mostly linked to voluntary leaving.

"We should not get our hopes up yet for a meaningful recovery of the manufacturing sector this year, considering that there seems to be no real improvement in the demand (new orders) component, especially as export orders contracted at the sharpest rate in the last three months," Erste Group concludes.

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