Romania’s industrial production index increased by 3.2% y/y in Q2, losing momentum from the 4.9% y/y advance in Q1 and the 9.7% y/y surge in Q4. But the advance of higher value-added industrial segments supports expectations for a slower decline in the value added generated by industry in the second quarter of the year.

The growth has visibly moderated after the robust increase last year (+15.3% y/y in May), but the volume of new orders reported by companies (+17.9% y/y in June) indicates that the slowdown has probably reached an end.

On a positive note, the seasonally adjusted index roe by 2.8% q/q, offsetting the 0.6% q/q decline seen in q1.

The industrial slowdown was less visible in the manufacturing sector that still posted an above-average growth of 4.3% y/y in Q2 (down from 5.9% y/y in Q1). The volume of activity in mining and quarrying edged down by 0.7% y/y in the quarter while utilities posted a deeper 2.6% y/y decline.

The production of automobiles was the main growth driver in Q2, when the industry’s advance accelerated to 15.3% y/y from 9.4% y/y in Q1 as production at Ford plant in Craiova rises. But car parts production is showing signs of fatigue, with the electronic and optic parts output edging down by 2.3% y/y in the quarter. 

The decline of the low value added industries built on low wages was visible in other sectors as well: the output of the garment industry contracted by some 11% in each of the first two quarters of the year. Higher value added industries such as pharmaceuticals maintained robust growth rates: 11.3% y/y in Q2 after 16.0% y/y in Q1.