Business Survey, June 2013

National Bank of Romania

June 2013: Mixed, Relatively Low-Amplitude Developments in Industry; Optimistic Mood in Construction In June, the results of the National Bank of Romanias business survey point to diverging trajectories in key indicators in the industrial sector. The expectations of construction managers improved compared to the previous month, being underpinned, to a certain extent, by the favourable weather conditions. Industrial output will remain on a slightly upward path, development suggested by the moderately positive gross series of the balance of answers and also visible when looking at the seasonallyadjusted data series. The activity will probably stay on a slightly upward path in the period ahead, considering the relatively low, positive balance of answers related to the total orders portfolio (including the support of external demand). The volume of works in construction will expand, the trajectory being highlighted by both the gross series (including even the possibility of a faster rate of increase), and the adjusted data series of the balance of answers. In the construction sector, the monthly growth rate of orders will intensify (moderately), solely on account of seasonal factors. The industrial sector will witness a slower rise in inventories of finished goods, with the decrease in the balance of answers to almost zero indicating even a potential disruption of this process. The construction sector will probably see a new decline in inventories of finished goods. The inventories of raw materials are foreseen to range within normal limits in both sectors under review (a slim deficit might arise in construction). Subdued demand will continue to adversely impact the activity of the two economic sectors. This factor is referred to by approximately 46 percent of the respondents in the industrial sector and by more than 52 percent of those in the construction sector. Inter-company arrears will continue to depress the economic activity according to about one-third of the respondents in the construction sector and, in proportion of approximately 11 percent, by the respondents in the industrial sector. Relatively low negative influences are expected to come from the high lending rates applied by banks and the movements in the exchange rate of the leu. The downward trajectory in the number of employees in industry will become more pronounced in June, as hinted at by both series of the balances of answers. New hirings are expected in construction, partly due to the favourable weather conditions. Producer prices in the industrial and construction sectors are likely to remain unchanged, given the large weight of respondents citing stable prices (94 percent in the former sector and 90 percent in the latter). Nonetheless, considering the marginal increase in the positive balance of answers on producer prices in construction, the likelihood of a meagre advance should not be ruled out. In month-on-month comparison, industrial company managers expect a slight decrease in investment. Pollees in the construction sector foresee no change in investment, mainly as a result of the seasonal factor with the adjusted series of the balances of answers revealing a steeper decline in investment in this sector. Profitability rate will probably see a more pronounced downward path in the industrial sector (as shown by both series of the balances of answers), whereas in the construction sector this indicator is expected to fare better (which is however not noticeable net of seasonal influences).

Shows the trend of the concerned indicator and is calculated as the difference between the weight of positive and that of negative answers in total answers. Unless otherwise indicated, the analysis is based on unadjusted data.

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