In Romania industrial output growth speeds to 12.2% y/y

Industrial output increased by 12.2% y/y in December, accelerating from the 9.9% y/y (revised from 9.5%) rise in November, according to preliminary data published by the statistical institute today (all prints in sa terms). The industrial output sped up its growth in the last month of 2017 even if sales moderated in the month, most probably over a better mood regarding the sector’s future developments.

The improvement of the industrial output index performance in December was triggered by faster annual growths in mining and by manufacturing, while the utilities segment turned to positive dynamics after two consecutive periods on moderate fall. However, the manufacturing was the major growth driver, reporting the strongest annual increase in 2017. Looking at the detailed prints, the manufacturing output growth was largely fuelled by some strong production jumps in several export-intensive sub-segments such as other-than-road transport vehicles (up by 53.0% y/y), machinery and equipment (45.1%), tobacco (33.4%) and road transport (19.2%). Several sub-segments that also sell locally also reported strong output increases in December (paper, metallic construction, electric equipment, pharmaceuticals), which reflect that the domestic demand also had a notable contribution to the index performance in the period. Meanwhile, the production growth acceleration in mining was triggered by faster rises in the auxiliary mining activities, whereas production of mineral resources reported slight annual falls. The insignificant increase in utilities production was partially backed by the low base. In the other breakdown, by terms of use, the strongest growth was again in capital goods group, which is in line with the brighter industrial outlook. The intermediate and durable goods production also rose strongly in December, while the energy goods group edged up marginally.

Generally, the industrial output moderately increased last year, mainly sustained by the manufacturing sector. The index reported growth fluctuations throughout the year, which mostly followed the external demand developments. The domestic demand came with some more visible positive influence on the index performance in the last months of 2017, when the better EU funds absorption fuelled some improvements in construction. Looking ahead, the industry will likely continue to remain strongly linked to the external developments, mainly in Romania’s major trading partners in the EU. The local mood is still in the gloomy area due to political uncertainties and fiscal risks, affecting the economic activity. However, the manufacturing sub-segments that supply construction goods and materials might improve performance this year, as investments and EU funds absorption are expected to revive.

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