Deterioration of business conditions among Romanian manufacturers marked the beginning of 2025, with the PMI® in manufacturing reaching an all-time low, according to BCR Romania.
In January, Romania's manufacturing sector faced a series of challenges, according to the latest economic data. The rate of inflation was strong but subdued compared to the series average, marking the second-strongest on record since July 2023.
The downturn in buying activity also gained momentum, with the rate of contraction being strong and among the sharpest on record. This led to a sharp decrease in input buying, reflecting the reduced output volumes. The rate of reduction in output volumes was marked and the strongest on record since data collection began in July 2023.
Despite these challenging conditions, firms remained confident that output would rise from present levels in 12 months' time. This optimism picked up to a seven-month high in January, indicating a resilience in the sector's outlook.
The decline in new orders slowed at the start of 2025, but it was still steep and elevated by historical standards. However, the softer drop in new orders was only modest and among the softest on record, suggesting a gradual improvement in the pipeline of new orders.
Input shortages were reported in January, leading to upward revisions to price lists at suppliers and increased energy costs. As a result, factory gate charges rose at a sharper rate at the start of 2025.
On the positive side, with less strain on supply chains, the decline in vendor performance was less pronounced in January. Pre-production inventories were depleted to a stronger degree in January, with the depletion being the joint-fastest across the survey history.
Backlogs of work continued to be depleted, although they exhibited a softer rate of decrease than in the month prior. This suggests that firms are working through their existing workload, albeit at a slower pace.
The latest data reveals further cuts to workforce numbers in January, linked to weak sales volumes and the non-replacement of leavers. This downward trend in employment is consistent with the contraction in the manufacturing sector.
Industrial production in manufacturing decreased by 2.4% year-on-year in the first half of 2025, signaling contraction in the sector. This decline is part of a broader slowdown in Romania's industrial activity, despite small gains in other sectors like electricity supply and some growth in construction works.
In conclusion, based on the most recent industrial production and price data, Romania's manufacturing sector is currently contracting, reflecting weaker industrial output and a challenging environment as of mid-2025. The BCR PMI, typically a key monthly indicator of manufacturing health, would likely reflect this downward trend if aligned with these official statistics.
[1] Source: National Institute of Statistics, Romania [3] Source: National Energy Regulatory Authority, Romania [5] Source: National Bank of Romania
- The challenging environment in Romania's manufacturing sector, as reflected by the contraction in industrial output, might influence the finance sector's risk assessment and business decisions regarding investments in the industry.
- Despite the current contraction in Romania's manufacturing sector, indicators such as firms' optimism about future output and the improvement in the pipeline of new orders suggest a potential rebound in this key business sector later in 2025.
