February 2010: Moderate Optimism in Industry; Slower Seasonal Decline in ConstructionUpdated: 01-03-2010 | Economy

The outcome of the business survey conducted by the National Bank of Romania in February shows a slight improvement in industry, while in construction the dampening impact of bad weather is seen diminishing against the previous month. Industrial company managers expectations on production suggest a possible, albeit small, increase in February, as illustrated by the balance of answers sticking to positive territory (12 percent). Construction activity looks set to decrease further, but the improvement in the negative balance of answers reveals that a slower pace is likely to occur. The outlook for both sectors appears to persist over the longer term, given that similar estimations were made in the case of orders.

Inventories of finished goods are expected to stay little changed, with the balance of answers in industry and construction standing slightly in negative territory and equalling zero respectively.

As for the stocks of raw materials, about 85 percent of the respondents in each economic sector anticipate that they will range within normal limits in February. However, given the negative levels of the two balances of answers, such stocks could fall slightly below the levels deemed as normal.

About 45 percent of industrial companies and 60 percent of the companies active in construction cited the detrimental impact of demand on the smooth running of production. Another factor depressing production consists in inter-company arrears, to a larger extent in construction (32 percent) than in industry (19 percent). Among the other negative factors are the high lending rates, the movements in the leu exchange rate and the scarce raw materials.

Personnel redundancies are seen persisting into February. This process might however slow down in both sectors under review, given the substantial alleviation of negative readings of the balances of answers.In both economic sectors, producer prices are expected to remain broadly unchanged, with the balances of answers standing very close to nil. This indicator appears to stabilise, as revealed by 86 percent of the pollees in industry and 94 percent of those in construction.

In February, investment in the industrial sector looks set to remain at a level similar to that recorded in January, as suggested by the balance of answers approaching nil and the status-quo in investment efforts expressed by more than half of the respondents. In construction, this indicator will diminish further, but the halving of the negative balance of answers to -20 percent suggests a possible alleviation of this trajectory. Profitability ratio in industry is foreseen to worsen against the previous month, as the balance of answers dropped to -21 percent. A negative performance is anticipated also in the construction sector, with the balance of answers amounting to -52 percent.