Except for output, which posted a relative improvement, all other components had a negative directional contribution this month. External demand continues to be a key factor for achieving domestic manufacturing growth. The flash data for the HCOB Germany Manufacturing PMI showed the index inching up in January to 48.7, reaching a 3-month high. Roughly 20% of Romania’s exports have Germany as their destination.
In 2025, industrial production likely ended the third consecutive year of contraction based on official data from Romania’s National Institute of Statistics. This is in line with PMI readings. Looking at the 12-month rolling average, industrial output stands at -0.8% y/y as of Nov25, with manufacturing at -0.9% y/y. Considering the external environment expectations, we should see an improvement in 2026, and we could end up with industrial production regaining some growth momentum. External demand remains a key factor for domestic manufacturing business. Substantial EU security investments and Germanys fiscal stimulus for infrastructure and defense spending are expected to boost European industrial production.
“The Output Index posted a relative improvement this month, showing a decelerating pace of decline the softest in four months. Reduced demand, partly due to higher prices on the back of tax hikes, and insufficient manpower constraining output in some cases, were the main problems reported. New orders showed an accelerating pace of decline in January. Budgetary constraints from clients, partly due to higher prices, were reported as the main reasons behind the move. Export orders also followed a similar pattern, suggesting that the external environment remained unsupportive. Strong competition and subdued demand were behind the change. As a result of sustained depressed demand, the future business expectations index continued to trend downwards, reaching a new survey low, though it remained above 50. Noteworthy is that 42% of the companies surveyed expect higher output over the coming year. It seems that depressed demand continues to be the main issue for domestic manufacturing business, and it should be just a matter of time before a trend reversal takes place,” the report reads.
Employment was also heading down this month, with a mix between insufficient work and challenges in finding skilled workers reported as the main problems. The backlog of work continued to diminish, reflecting weak demand, while the decline in stocks of finished goods, probably being more the result of less work being done rather than growing sales. The trend for purchasing quantities and stocks of purchases tell the same story of poor demand. Suppliers delivery times continued to lengthen in January due to adverse weather conditions and limited availability.
According to the report, “both input and output price growth accelerated in the recent month. This was to be expected considering the excise duty hike which took place this month. This shock should be transitory and mainly linked to higher taxes, but there were some reports regarding higher raw materials costs, which could be more of a concern if it persists. Part of the growth in input prices was passed on to customers.”
The PMI index, which assesses the state of the manufacturing industry in accordance with Standard & Poor’s standards, is a composite single-figure indicator of manufacturing performance, derived from new orders, output, employment, suppliers’ delivery times, and stocks of purchases.
Romania’s manufacturing PMI is released on the first working day of each month and is compiled by S&P Global. BCR, the Romanian unit of Austria’s Erste Group, launched the PMI in early 2024.