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Investing.com -- Romania’s manufacturing sector deteriorated in October, with the BCR PMI index falling to 47.6 from 49.8 in September, confirming that signs of stabilization last month were only temporary.
The October reading marked the strongest deterioration in the sector since March, with four of the five PMI components showing negative directional influences.
At the center of the sector’s recession was a sharp decline in new orders, reversing the brief growth period seen in September.
According to respondents, high selling prices discouraged sales given clients’ already limited budgets. Export orders also declined in October, though to a lesser extent than at the global level, with respondents noting difficulties in offering competitive prices.
Production fell for the seventeenth consecutive month in October, with the pace being the fastest since March. Factory employment declined again, with reductions reported in each of the 17 months of lower production. The latest decrease reflected a combination of layoffs and voluntary employee departures, with the latter not being replaced.
Manufacturers sought to economize in their purchasing decisions, with input buying falling for the second time in three months. As a result, firms drew on input stocks to meet production requirements in an attempt to protect cash flow while order numbers remained low.
Despite reduced purchasing activity, longer delivery times for inputs continued to be reported. Reasons cited by respondents included lack of stock, reduced personnel at suppliers, and problems with roads and couriers.
The impact of the recent VAT increase continued to manifest in the form of higher costs in October. Although elevated, the inflation rate was much milder than the peak recorded in August. At least some of the pressure from higher costs was passed on to clients in the form of increased selling prices.
Looking ahead, Romanian manufacturers were less confident about future production levels in October. Sentiment, while positive, fell to the lowest level ever recorded, even below the August minimum. According to respondents, their outlook was influenced by fragile market conditions and concerns about customers’ purchasing power.
Ciprian Dascalu, Chief Economist at BCR, noted that the most concerning aspect comes from new orders, which saw a sharp decline after exceeding the 50 threshold for the first time in 15 months in September. He added that Romania’s manufacturing industry will likely record its third consecutive year of contraction in 2025.
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