BCR Romania Manufacturing PMI® at record low, as business conditions deteriorate for Romanian manufacturers at the start of 2025
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	<h3>Production volumes fall at quickest rate on record (since July 2023)</h3>
	</li>
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	<h3>Softer drop in new orders signaled</h3>
	</li>
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	<h3>Sharp decrease in purchasing activity supports stock reduction</h3>
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</ul>

<p>The latest BCR PMI® data showed the decline in the Romanian manufacturing sector deepening. Operating conditions deteriorated to the largest extent across the survey history to-date in January, with the pace of decline overtaking December's recent record. Despite a softer fall in new orders, output volumes were lowered at a survey record pace, which triggered an equally sharp decrease in input buying. Challenging conditions failed to dampen firms' confidence in the outlook for output, which rose to the highest level seen since June 2024.</p>

<p>The headline BCR Romania Manufacturing PMI® is a composite single-figure indicator of manufacturing performance derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. A PMI reading above the 50.0 no-change mark signals an improvement in the health of the sector over the month, while a figure below 50.0 points to a deterioration.</p>

<p>From 46.4 in December, to 46.1 in January, the headline PMI ticked down slightly to post a new survey low and the largest deterioration in business conditions on record. Faster falls in output and stocks of purchases, as well as reduced pressure on supply chains (suppliers' delivery times) contributed to the drop in the headline index in January.</p>

<p>Reflective of muted demand and tight customer budgets, Romanian manufacturers' order book volumes fell again in January. The rate of contraction slowed at the start of 2025 was nevertheless steep and elevated by historical standards. Likewise, manufacturers in Romania also signalled a softer decline in export sales in January. The speed of contraction was only modest and among the softest on record.</p>

<p>Output volumes were scaled back at a sharper rate in January, amid reports of demand weakness and challenging economic conditions. The rate of reduction was marked and ticked up to its strongest on record (since data collection began in July 2023).</p>

<p>The downturn in buying activity also gained slight momentum in January. The rate of contraction was strong and among the sharpest on record (only outpaced by February and August 2024).</p>

<p>Firms therefore relied upon their stocks of warehoused inputs to support production requirements. Thus, pre-production inventories were depleted to a stronger degree and one that was the jointfastest across the survey history (equal to July 2024).</p>

<p>With less strain on supply chains, the decline in vendor performance was less pronounced in January. Where lead time did lengthen, companies frequently attributed this to shortages at suppliers.</p>

<p>Input shortages coincided with reports from panellists of upward revisions to price lists at suppliers and increased energy costs. With that, there was upward pressure on operating expenses signalled in January. The rate of inflation was strong but subdued compared to the series average. Factory gate charges likewise rose at a sharper rate at the start of 2025. The rate of inflation was the second-strongest on record, only just outpaced by that seen in January last year.</p>

<p>As has been the case on a monthly basis since June last year, latest data revealed further cuts to workforce numbers. Companies linked the reduction to weak sales volumes and the non-replacement of leavers. Nevertheless, backlogs of work continued to be depleted in January, although they exhibited a softer rate of decrease than in the month prior.</p>

<p>Firms remained confident that output would rise from present levels in 12 months' time. The level of optimism picked up to a seven-month high, as panellists expect new contracts and planned product launches to support output growth. Some firms were also hopeful for improved economic conditions in the year ahead.</p>

<p>&nbsp;</p>

<h3>Ciprian Dascalu, Chief Economist at BCR said:</h3>

<p>"The BCR Romania Manufacturing PMI dropped to a new record low at the start of 2025. The headline index came in at 46.1 in January, down from 46.4 in the previous month. A softer increase in suppliers’ delivery times was a key directional driver in January in the context of an eased rate of contraction of new orders compared to the previous month and an almost unchanged Output Index. Production volumes declined at the quickest rate on record showing that the manufacturing sector remains in distress. Though still in contraction, the HCOB Flash Germany Manufacturing PMI showed some improvement in January and came in at an 8-month high, which is a good sign for Romanian producers as well. In general, external demand is expected to be moderately better this year which should boost export orders.</p>

<p>"We do not yet have the full official data for 2024 but based on data up to November we can conclude that manufacturing output ended the second consecutive year of contraction. GDP growth is expected to slightly accelerate in Romania in 2025 and provided that external demand is somewhat supportive, this year should break the streak and manufacturing output is likely end up in green territory. However, structural issues continue to be an important factor for Romanian manufactured goods which might ultimately lead to a slower recovery.</p>

<p>"Low demand and a challenging economic climate continue to negatively affect output. The current contraction trend of the Output Index has now been happening for eight months. Weak new orders remain linked to budgetary constraints of customers. Both the new orders and new export orders readings came higher in January vs December albeit remaining below the 50 neutral mark. We might be witnessing some early signs of bottoming out, but it is premature to tell. Employment also continues to suffer the effects of subdued demand. An eighth consecutive monthly decrease in workforce numbers was recorded in January. Business expectations improved in January and firms remain optimistic despite the challenging period.</p>

<p>"Input prices remained on the rise in the first month of 2025. Cost pressures were strong but subdued by historical standards. Increased fuel and electricity costs and higher suppliers’ prices were the main reasons mentioned by the survey respondents for this evolution. Output prices rose significantly in January sequentially speaking. Factory gate prices have been rising for 15 months. Output prices were raised to cover increased salaries, higher taxes, and material costs."</p>

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<p><em>*This report is provided by&nbsp;<a href="https://www.bcr.ro/en/research/report/en/SR380277">BCR Research</a>.</em></p>
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