Romania's industrial activity shows fragile signs of recovery
<p>Romania's seasonal and workday-adjusted industrial output increased for the second month in a row in April (+2.3% m/m), reaching the highest level in the past 12 months after having demonstrated a fragile (+1.4% per annum) and not particularly statistically relevant trend across the past year, according to data published by the statistics office. This is the first positive sign since the war in Ukraine halted the post-COVID industrial recovery. Ironically, one of the recovery drivers is Europe's Readiness 2030 scheme (formerly ReArm Europe) and defense spending across the continent.</p>

<p>The adjusted industrial output in the core manufacturing sector advanced by 2.9% month-over-month in April, consistent with a similar fragile upward trend over the past 12 months (1.9% per annum).</p>

<p>The gross industrial output in April was 9.6% down y/y in gross unadjusted terms due to the fewer working days (Orthodox Easter, celebrated last year in May).</p>

<p>The fragile and still unconvincing recovery identified in Romania's industry takes place at a level of activity that is some 3.6% below the average industrial output in the previous 12-month period and 7.2% below the 2019 average industrial output.&nbsp;<br />
Erste Group, in a research note on June 16, argues that a recovery to 1.1% y/y industrial advance in 2025 is still possible. "We believe that the continuation of the fragile growth trend detected in the year to April, albeit keeping the full-year advance in the negative area, would be encouraging enough."</p>

<p>The state forecasting body CNP, in a more conservative macroeconomic update on May 14, projects a 1.5% industrial contraction in 2025.&nbsp;</p>

<p>Erste Group ties its hope for industrial recovery in Romania to external developments and some feeble trends in the structure of the PMI index, heralding a possible reversal of the trend.&nbsp;</p>

<p>"We think that industry could return to growth later this year, with an estimated increase of +1.1% in 2025 with some downside risk," Erste Group note reads.</p>

<p>&nbsp;"We see positive effects on local manufacturing from increased defense and infrastructure spending in Germany, offsetting the tariff war between the US and other countries. Confidence indicators are mixed, with easing contraction rates for local and European manufacturing."</p>

<p>As regards the specific industrial sectors, we have established negative trends over the past 12 months for the sectors of chemicals industry (-14.7% per annum) and metallurgy (-17.3% per annum), besides the light industries (textile, clothing) that have lost momentum at a rate of 27% per annum. Tobacco manufacturing has also lost ground at a rate of 23.9% per annum. On the upside, industries such as food production (+4.3%), crude oil refining (+12.3%), pharmaceuticals (+19.3%), and rubber and plastic (+10.9%) are posting positive growth trends. The growth trends have been calculated based on the past 12 months' performance by linear regression.</p>

<p>(Photo: <a href="https://www.dreamstime.com/" rel="noopener" target="_blank">Kanok Sulaiman/ Dreamstime</a>)</p>

<p><em>iulian@romania-insider.com</em></p>