SIMILAR ARTICLES

Q2 / Average monthly income per capita in Romania has risen to nearly RON 1,600: Changes in redistribution of family budget

Data published by INS for the second quarter of 2018 show that Romanians’ monthly incomes have reached nearly RON 1,600 per person. They were RON… Mai mult

Current account deficit flickers to red on dashboard

According to the data released by Eurostat, Romania’s current account deficit exceeded, in the second quarter of the year, the threshold of five percentage points… Mai mult

Strategic chemical industry: Romania, on top in import increase and ranking last in EU in terms of increase in exports outside single market

Data published by Eurostat show that Romania recorded the second highest annual growth rate in imports of non-EU chemicals from 2007 to 2017 (13.1% per… Mai mult

Economic growth in the pocket: Current accounts vs. saving accounts – 64% to 4.5%

  Rising incomes have fuelled consumption and, implicitly, the economic growth in recent years, but not the savings. Although a large proportion of the population… Mai mult

Domestic software and IT services market declines, growth will only be based on external market

Total turnover in the IT sector increased by 11 percentage points in 2017 compared to 2016 and exceeded the four billion euro threshold forecasted, according… Mai mult

“Industrial inflation” above “popular inflation” – Energy, already 14% more expensive: Lights, shadows and implications

de Marin Pana , 8.10.2018

Industrial Production Price Index (IPPI) slightly declined to 5.86% in August 2018, but remained significantly above consumer price inflation as measured by CPI (5.06%).

The manufacturing industry sets the tone across the economy (although it contributed only 23.6% in the first half of this year to the GDP formation and 1% of the growth of 4%), and a price problem is a problem of competitiveness.

At the beginning of 2018, the price decrease reserve from 2015 and 2016 has been exhausted, with the rising energy prices, significant wage increases and the exchange rate increase over the initial forecasts. By baseline effect, though, IPPI level declined after the middle of 2018, when it reached a maximum of 6.14%.

*

  • IPPI evolution in August 2015-2018 (% compared to the same month of the previous year)
  • Month             Aug 2015        Aug 2016        Aug 2017        Aug 2018        Aug 18/Aug 14
  • Total IPPI
  • Domestic market IPPI
  • Foreign market IPPI

*

Inflation has been initially generated by the index for the foreign market and the gap to domestic IPPI is considerable both in the phase of price reduction and the return to the positive range. A reduction in this gap followed, the equalisation, and now the reversal of the ratios, with the domestic level slightly above the foreign one (5.95% versus 5.71%).

The external inflation channel was also fuelled by the depreciation of the local currency amid a significant increase in the purchasing power. That also manifested for imported products (the trade deficit increased from around EUR 10 billion in 2016 to nearly EUR 13 billion in 2017 and went up by more than 11% in the first seven months of 2018).

Situation by large industrial groups. Effort to reduce manufacturing costs, offset by energy bill

By major industrial groups, the highest rise in prices occurred in the energy sector, which saw an exceptionally high monthly growth rate of 2.56%, and where energy bills were more than 14% higher than one year ago and add to the rhythm of about 11% increase in wage costs in the manufacturing industry. Effects will inevitably be transmitted through the entire production chain of goods to consumers.

Compared to the same month of the previous year, the intermediate goods segment came second with + 6.43% (above the average level and well above the other IPPI components excluding the energy industry). The attempt to restructure the manufacturing and streamline production processes has limited the price increase to + 0.21% compared to the previous month.

We are here right on the segment of parts and subassemblies produced in Romania and then integrated into end products, mostly in other countries. That means this trend will be managed by companies that use local suppliers, with implications that are not felt yet at the local consumer level.

Somewhat surprisingly, price increases have remained decent in key final product sectors both at the month and annual levels, namely the capital goods industry (only + 1.45% in the last 12 months and + 0.03% compared to July (+ 2.22% and + 0.04% respectively) and the durable consumer goods industry (+ 2.46%, after a sensational monthly decrease of -0.56%)

They are anonymous enterprises that had to comply with the new wage demands on the labour market and the massively increased energy costs, managed to become more efficient and support (with the price visible in the decline of the profit tax as a share of GDP positioned at the lowest levels in the last four years).

It remains to be seen, though, how long they will be able to find resources for increasing the efficiency and how long they can narrow their profitability to support the pressure from the superior salary increases in the public sector. With a state that has granted unsustainable income increases, hard to find in the private sector, where they have to result from the economic result.

*

  • Industrial Production Price Index by major industrial groups
  • IPPI     August 2018 compared to
  • July 2018        August 2017
  • Total
  • Intermediate goods industry
  • Capital goods industry
  • Durable consumer goods industry
  • Goods of daily use
  • Energy

*

The manufacturing industry recorded price increase rhythms slightly lower than the general ones (only + 0.11% monthly and + 5.65% compared to the same month of the previous year), with significant differences between various sectors (almost 40 % between the evolution of prices in crude oil processing, + 35.33%, and in the manufacturing of transport means other than for road transport -2.56%).

The manufacturing of chemicals (+ 12.88%, more than double compared to three months ago), metallurgy (+ 11.05%), machinery and equipment repair (+ 10.73%) and manufacturing of computers and electronic and optical products (+ 6.46% but on a downward trend) contributed values above the average to IPPI.

By contrast, other segments recorded much lower price increases, such as the manufacturing of metal structures (+ 1.77%, -0.44% over the previous month), electrical equipment manufacturing (+ 1.68% and a significant share in exports), food industry (+ 1.29%) or tobacco products manufacturing (+ 0.31%).

All these developments will be seen with a delay of some months, following the completion of the integration chain into the final product and the delivery to the end-user, implicitly in the CPI. As well as in the GDP deflator (which includes prices across the economy) by which the nominal growth will be “deflated” in order to show us the real economic growth this year.

Mergeți în homepage ›

Publicat la data de 8.10.2018

Lăsați un comentariu


NEWS

Cluj-Napoca - only city in Romania that receives European funds for innovative projects

Only Cluj-Napoca is among the 22 European cities that will receive financing from the European Regional Development Fund (FEDR) for innovative solutions in addressing urban… Mai mult

Prime Minister Dancila dismissed 13 of 15 civil society representatives from Economic and Social Council. They were blocking legislation that did not gathered all opinions

Prime Minister Viorica Dancila has replaced 13 of the 15 civil society representatives in the Economic and Social Council (CES). Following a decision published on… Mai mult

West Quadrilateral / Four counties joined to directly access European money for major infrastructure projects

From right to left: Gheorghe Falca, Nicolae Robu, Ilie Bolojan. Emil Boc, Mayor of Cluj Napoca, misses Four mayors from the West of the country… Mai mult

Chamber of Deputies / PSD loses UDMR’s support for amending Offshore Law, draft returns to committees for a week

The plenum of the Chamber of Deputies decided on Wednesday to resend the Offshore Law to committees after a seemingly surprising request of UDMR leader… Mai mult

Government amended insolvency law. Guarantees given by Minister Teodorovici

The Government adopted on Thursday the draft Emergency Ordinance for amending and supplementing legislation in the field of insolvency, which provides among other things for… Mai mult

Romania ranked 7th in EU in terms of renewable electricity

Unlike the vast majority of the economic areas, in which we are at the bottom of the European ranking, Romania succeeded to rank 7th by… Mai mult

Resounding failure of PSD lobbying action in Brussels

There are clear signs that the lobbying action launched by the ruling coalition in Brussels in favour of the government in Bucharest will end with… Mai mult

MFP: Romania does not endorse a separate budget for Eurozone and rejects the idea of ​​taxing financial transactions

Romania does not endorse a separate budget for Eurozone and rejects the idea of taxing financial transactions, Minister of Public Finance Eugen Teodorovici said after… Mai mult

Finance Ministry wants to change rules for insolvency: state could also register claims after procedure is launched

Companies’ possibility to avoid paying creditors (and in particular the payment of tax receivables) simply by declaring their insolvency would be drastically limited, according to… Mai mult

Phil Hogan: Swine fever in Romania has an impact on neighbouring countries and EU trade in pigs

Prime Minister Viorica Dancila, European Commissioner Phil Hogan and Agriculture Minister Petre Daea The swine fever epidemics in Romania has an impact on neighbouring countries,… Mai mult

Infrastructure projects lost EUR 41.5 million following budget amendment. In what projects cuts have been made

Despite the assurances that Dancila government is concerned and intensely working on the road infrastructure projects, at the budget amendment the Transport Ministry has cut… Mai mult

European Parliament have decided to adopt in October a resolution on the rule of law in Romania

Leaders of the political groups in the European Parliament have decided to adopt in October a resolution on the rule of law in Romania. The… Mai mult

"Romania's buffers have deteriorated, the country is less prepared for a negative shock" - IMF will reduce economic growth estimate

Romania will be less prepared if the economy is hit by a negative shock, as the structural deficit has been deteriorated - IMF representative for… Mai mult

Premiere: CSAT asks Finance Ministry to amend amendment - session suspended until Government comes with a draft that does not affect budgets of secret services

President Klaus Iohannis suspended on Tuesday the CSAT meeting for discussing the budget amendment, as there was no consensus on the budgets of institutions from… Mai mult