Romania’s PMI still in the contractionary area after four-month improvement

The BCR Romania Manufacturing PMI inched up to 48.8 in June from 48.3 in May, posting a fourth consecutive month of improvement from its all-time low recorded in February and the highest reading for this year, according to Erste Group.

Erste analysts continue to expect 2026 to bring a modest expansion in manufacturing and, subsequently, in industrial production, following three consecutive years of contraction.

The index has remained in contraction territory over the past couple of years. However, they admit that "the very weak start of the year suggests that downside risks to our forecast have increased, despite some positive signs in the most recent hard data for April." Indeed, seasonally adjusted industrial output has improved through the first months of 2026 (January-April), while still maintaining negative annual performances for each of the four months.

The road towards stabilisation in Romanian manufacturing might face, once more, external headwinds, as the manufacturing PMIs in the eurozone are suggesting a slower rate of expansion, with the German flash PMI pointing to a standstill in June, according to Erste's note.

A deterioration in external demand is likely to dampen recovery hopes for the domestic manufacturing sector, which is deeply integrated into European supply chains, though the recent sharp fall in oil prices is yet to be fully reflected in confidence indicators.

Except for Stocks of Purchases, all PMI components had a positive directional contribution in June. Both input and output price inflation accelerated, with stronger pass-through to customers. Recessionary soft data and higher reported price pressures cement the view of a stagflation puzzle faced by Romanian policymakers.

(Photo source: Arlawka Aungtun/Dreamstime.com)