Romania’s industrial production index down 3.4% y/y in July

Romania’s industrial production index down 3.4% y/y in July
By Iulian Ernst in Bucharest September 15, 2016

Romania’s industrial production index fell by 3.4% y/y in July, according to the statistics office. This was the steepest decline since 2009, when industrial activity plunged by 5.5% y/y amid weak demand and destocking.

The 12-month rolling industrial output in the manufacturing sector increased by 2.5% y/y. The growth decelerated from 3.1% y/y in June, reaching the lowest level since January 2013. The mining, quarrying and utilities sectors dragged down the overall industrial performance to just 1.6% y/y overall growth of the rolling 12-month output.

The sharp annual decline in the industrial production was partly an effect of lower number of working days in July, since the seasonally and workday adjusted production index remained constant from last year. But the slowdown in the manufacturing sector has been a visible trend in recent months, as well as activity optimisation in the utilities sector, driven by lower regulated fees and the hiatus in the mining and quarrying sector prompted by low energy prices.

External demand has failed to deliver traction to industrial production recently, after being the main driver of industry’s outstanding performances for years. Exports contracted by 4.6% y/y in July, which was the steepest decline in more than three years. The 12-month rolling exports were 2.3% up y/y, the lowest level since June 2013.

Under these circumstances, Romania's industrial capacities are limiting the output and exports, and further industrial expansion depends on invetsments. 12-month rolling exports have already increased by 62% above the pre-crisis peak and manufacturers’ output was 31% above their pre-crisis peak as of July.

In January-July this year, gross industrial output edged up by 0.6% y/y, the statistics office reported. Manufacturing expaded by 1.4% y/y, while mining and quarrying activity contracted by 18.9% y/y. Utilities suppliers’ activity eased by 1.5% y/y.

The production of electronic and optical devices and parts, a critical industry including automobile parts producers, contracted by 17.5% y/y in the seven-month period. Non-metalic mineral production increased, on the contrary, by 13.3% y/y as the construction sector gained momentum. Tobacco manufacturing notably expanded by 18.2% y/y.