The strong industrial production increase of 3.9% (month/month) and 2.8% (year/year) recorded in March took economic analysts by surprise. BCR had forecast a drop of -0.7% against the same month in 2023.
Confidence indicators have improved recently, Eurozone economy shows signs of recovery, and final household consumption in Romania is solid, stimulating demand for goods manufactured by local industry.
Revising forecasts
BCR forecast for industrial production increase in 2024 was revised upwards, to +3.1% from 2%. In 2023, industrial production fell by 2.5%.
Industrial production, as seasonally adjusted series according to working days, was 3.9% higher compared to the previous month thanks to manufacturing industry growth (+5%), as well as that of production and supply of electricity and thermal energy, gas, hot water and air conditioning (+1%). Extractive industry fell by 2.2%.
Quarterly data shows a positive trend in the industry which rose by 1% in Q1/2024 (Q/Q), but fell by 0.9% year-on-year. Industrial production had fallen by 1% in the first quarter of 2023 (Q/Q) and by -1.2% year-on-year. Industrial production had fallen in the last quarter of 2023 by 1% (Q/Q) and by -1.2% year-on-year.
Economic sentiment returns to positive territory
BCR Romania Manufacturing PMI rose to 51.5 in April from 49.3 in March, reaching the best value so far.
“This could suggest a recovery of the Romanian manufacturing sector, although sector losses recovery is expected to be non-linear”, state BCR economists in a note issued on Tuesday.
The industrial production component of the Economic Sentiment Indicator improved to 0.3% in April, from -0.3% in March, supported by rising new demand in manufacturing. Production capacity utilization fell to 68.9% in Q2/2024 against 71.2% in Q1/2024, suggesting that demand remains weak and local factories still operate below potential. External confidence indicators show some positive developments in April. HCOB Eurozone Manufacturing PMI remained in contraction territory, but business climate confidence improved. The industrial component of the Ifo business climate index for German economy rose, sustained by improved expectations.
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