There is no return in July from June

In July the activity was just as low as in June, according to the Industrial Barometer published on Thursday, the growth of the industry was low and some important indicators were even more down than in the previous month.

"Managers' expectations for the next six months have remained, but are below the historical average of the past 3 years, and the July data do not contain feedback in practice – the pattern of indicators suggests an internal weakening of industrial activity, aggravated. We expect that it will probably be plausible in August or more in September to see a recovery start, but for the time being it is almost certain that the steady decline in growth over the last three months will be felt level of the whole economy, "said the study that was quoted by

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The production volume remained positive from July to June and increased from 55 in June to 56 in July, according to the Industrial Barometer, which is carried out monthly by the IRSOP and the SNSPA Faculty of Management. "The minimal progress does not have the support of the correlated indicators and seems to be a short short term", is mentioned in the quoted analysis. Stocks also fell from 49 to 47, a sign that companies have abandoned some of the finished products, prevented unnecessary storage and did not produce enough to increase the stock.

Instead, in July the number of employees remained at a negative level of 47 points, as in June, and the employment rate was 3 points below the historical average of 50 points.

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New orders fell from 53 to 52 points, according to the Industrial Barometer. "Reducing new orders, however, has a demoralizing effect and probably explains to a large extent why the optimism of companies is gradually eroding", the authors of the survey quoted.

In comparison with the rest of the indicators, export orders fell more drastically, from 57 in June to 54 in July. "Domestic demand has steadily declined over the last five months, while export orders have fluctuated up and down without a clear direction, with export orders becoming even more volatile than domestic demand and therefore unpredictable." A likely explanation is the weakening of the euro zone's activity. due to tensions in world trade ", emphasizes the industrial barometer.

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Consistently, the import of raw materials fell sharply from 60 to 54, and companies began to reduce their expenses due to a lack of raw materials and rising energy and raw material prices.

Moreover, production costs fell in July to 66 to 70 in June, amid falling current activity and restraint in terms of investments.

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"However, the cost level is above the historical average of 63. The cost indicator has to be carefully monitored over the coming months." Prices paid by the company are an important indicator for predicting final prices at consumer level. "If companies pay less, the prices have to fall with positive effects on inflation ", the quoted study explains.

In July, the prices of companies for their own products fell sharply from 60 to 57, in the context of low demand and future uncertainties, with companies with low capacity to keep sales at advantageous prices.

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The optimism index of managers remained at 59 points in June, two points below the historical average, the score that reflects the extension of the downward trend. "The value of the index stems from the aggregation of individual managers' expectations about demand, output and future revenue, but the sub-indexes show valuable signals." Compared to June, in July, companies have less expectations on how exports, inventories export orders and production costs over 6 months.The expectations regarding domestic demand have remained unchanged, instead they have raised expectations of the prices that managers expect to get from selling their own products, "says the Industrial Barometer.

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So the big question that companies are asking now is whether the current weak growth is a temporary problem caused by seasonal influences or a sign that the water is getting worse in the second half of this year. "While managers appear to be very anxious, wage increases and low unemployment may boost domestic demand, but in the coming months there will be a clearer response to business uncertainty when seasonal effects are spread," said the study quoted.

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The monthly barometer of the current situation in the sector has been made by the IRSOP and SNSPA since 2014, and appears about 20 days after the end of the reporting month. Based on a sample of 300 industrial companies, this represents the situation at the level of 15,200 industrial companies with more than 9 employees in Romania, which generates about 95% of the total turnover in the industry. An index based on the net response rate indicates an extension if it passes 50 points and shrinks if it falls below 50. For the situation in July 2018, data was collected through direct interviews with business managers between 16 and 20 August 2018.

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