Romania’s manufacturing index PMI  compiled by BCR (chart) contracted for the second consecutive month in July,  dropping back to 47.8 after three consecutive months at or above the 50 no-change mark.

The country’s manufacturing sector is thus back in contractionary territory at the beginning of the third quarter, after a short-lived period in the expansionary territory during the second quarter of the year.

BCR analysts see as unlikely a consistent gain in momentum for Romanian manufacturers any time soon, partly because the HCOB Manufacturing PMI flash release for the German economy, which is the main trading partner for the Romanian manufacturing sector, came in lower in July versus June.

The decline of the Romanian PMI index was broad-based with four out of the five components (new orders, output, employment and stock of purchases) having a negative contribution, indicating that it is likely to take longer than anticipated until a meaningful and sustainable rebound in the manufacturing sector.

Only the suppliers’ delivery times component made a positive contribution.

The output component posted a second consecutive monthly contraction in July. Since the start of data collection in July 2023, the output component has posted only two readings above 50-mark in April and May 2024.

Moreover, the new orders component dropped sharply below the 50-mark, with domestic demand unable to offset the weak export orders.

Adding to the bleak mood, the future output index (new orders) dropped to the lowest level on record in July as some companies are seeing challenging economic conditions in the year ahead, though it remained well above the 50-point threshold.

The employment component of the index remained below 50 in July. The monthly rate of job shedding was one of the quickest seen this year.