Romanian manufacturing sector falls deeper into contraction in October

Investing.com -- Romania’s manufacturing sector deteriorated in October, with the BCR Romania Manufacturing PMI falling to 47.6 from September’s near-stabilization reading of 49.8, marking the strongest sector decline since March.

The downturn was primarily driven by a sharp drop in order books, reversing the brief growth period seen in September. Manufacturers reported that elevated selling prices deterred sales amid already constrained customer budgets. Export orders also declined, with companies noting difficulties in pricing competitively.

Manufacturing output fell for the seventeenth consecutive month, with the rate of decrease accelerating to its fastest since March. This prolonged production decline led to continued job cuts, with employment down for the 17th straight month due to redundancies and voluntary leavers not being replaced.

Purchasing activity decreased for the second time in three months as firms turned to existing inventory to fulfill production requirements. Despite reduced purchasing, suppliers’ delivery times lengthened due to stock shortages, reduced vendor staffing, and logistics issues.

The impact of Romania’s recent VAT increase continued to drive higher costs, though inflation was softer than August’s peak. Manufacturers passed some of these increased costs to customers through higher selling prices.

Business confidence fell to its lowest level on record in October, just below August’s previous low. Companies expressed concerns about fragile market conditions and customers’ purchasing power.

Ciprian Dascalu, Chief Economist at BCR, noted that all PMI components except suppliers’ delivery times had negative contributions, with the strongest negative influence coming from new orders and output. He highlighted that the Romanian manufacturing industry will likely post its third consecutive year of contraction in 2025.

Dascalu attributed the sector’s challenges to multiple factors including higher energy costs, rapid increases in labor costs (especially minimum wage hikes), increased financing costs, and real currency appreciation, all while manufacturers operate with tight profit margins.

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