July saw a decline in Romania's PMI index across all components, excluding inventories.
Romania's Manufacturing Sector Continues to Struggle Amidst Weaker Demand
The Romania Manufacturing PMI index, a key indicator of the sector's health, has shown a persistent contraction for the thirteenth consecutive month, according to data released by BCR Erste Group. The index decreased from 48.7 in June to 48.4 in July, indicating a continued decline in the manufacturing sector.
The contraction is primarily driven by weaker domestic and external demand. The new orders component, a significant indicator of future production, showed a negative contribution for the third consecutive month, with a significant decline in export orders. This contraction in new orders has been ongoing since April, marking three consecutive months of contraction.
Industrial output, another crucial component, has contracted for the fourteenth consecutive month in July. However, the rate of contraction in July was softer than historical averages, offering a glimmer of hope.
The only component not contributing negatively in July was inventory (stock of purchases), which sustained some of the previous month's gains. This suggests that businesses may be holding onto more inventory than usual, perhaps in anticipation of a recovery.
Continued job shedding, mostly due to voluntary departures, indicates structural adjustments within the sector. The demand (new orders) component returned to a 1-point negative contribution seen a year ago in July, further indicating the persistent weakness in the sector.
The prospects for a meaningful recovery in Romania's manufacturing sector this year remain uncertain due to persistent weak demand and external pressures. The sector's performance is influenced by broader economic conditions and policy decisions.
Erste Group predicts no meaningful recovery of the manufacturing sector this year, given the lack of improvement in the demand (new orders) component. The output component made a smaller negative contribution over the past three months, but the improvement trend was curbed in July due to announced domestic fiscal consolidation measures and weaker external demand.
Weaker external demand has further complicated recovery efforts. Export orders contracted at the sharpest rate in the last three months, and external demand also unexpectedly deteriorated in July.
The only positive sign is the easing of producer inflation, which could influence production costs and decision-making. However, until there is a significant improvement in demand, the outlook for Romania's manufacturing sector remains challenging.
[1] Data from BCR Erste Group's Romania Manufacturing PMI report for July 2025. [2] Data from BCR Erste Group's Romania Manufacturing PMI report for June 2025. [3] Data from BCR Erste Group's Romania Manufacturing PMI report for May 2025. [4] Data from BCR Erste Group's Romania Manufacturing PMI report for July 2025.
1 The continued contraction in Romania's manufacturing sector, as indicated by the Manufacturing PMI index, may negatively impact the overall business environment, particularly industries reliant on domestic and export orders.
2 In an effort to lower production costs, some businesses might divert their financial resources towards managing inventory more efficiently, with the intention of minimizing losses amidst weaker demand in the finance sector.
