Romanians more optimistic about economic future than other Europeans


Pessimism about the economic outlook is beginning to be felt in Europe. The latest data from Eurostat shows that confidence in future positive economic developments is declining in both the European Union and the Eurozone. But Romanians are more positive about the immediate economic future.

Macro Commentary by eToro Romania Analyst Bogdan Maioreanu

In July 2022, the Economic Sentiment Indicator (ESI) fell in both the European Union (-4.2 points to 97.6) and the euro zone (-4.5 points to 99.0), falling below its long-term average. The ESI fell significantly in four of the six largest EU economies, namely Spain (-5.0), Germany (-4.9), Italy (-3.4) and Poland (-3.2), while it remained broadly stable in France (-0.1) and the Netherlands (+0.2). Romania recorded a slight increase of 0.3.

The Economic Sentiment Indicator (ESI) is a composite indicator calculated from responses to surveys in industry (weighting 40%), services (30%), consumers (20%), retail trade (5 %) and construction (5%). Values ​​above 100 indicate above-average economic sentiment and vice versa. Romania is more positive than the EU average with the latest value at 101.2.

In the EU, the drop in the ESI in July was due to significant losses in industry, services, retail trade and consumer confidence, while construction confidence declined more slightly. For Romania, confidence in the construction sector is below the EU average. We also see a drop in confidence in the industrial sector, with Romania in negative territory along with Poland, Czechia, Slovakia, Bulgaria and Slovenia. Overall industrial sector confidence in the EU is down, with executives surveyed pricing the current level of global order books and their production forecasts at a 20-month low. Finished goods inventory valuations rose sharply, indicating weakening sales. For the next three months according According to the National Institute of Statistics, industrial production should remain stable.

While EU confidence in the retail sector declines (-1.8), Romania is optimistic, with the index in positive territory and showing an increase of 0.7. This corresponds to the expectations of Romanian retailers for the next three months according to the National Institute of Statistics. The volume of orders to suppliers of goods by commercial establishments will increase, but Romanian retail officials expect a sharp increase in retail prices.

Retail employers expect an increase in the number of employees for the next three months which could prove difficult. Unemployment Data for June, published today, shows 5.3%, the lowest level for the past year. At European level, employment forecasts are deteriorating but still remain optimistic, with Romania above the EU average.

But inflation and recession fears are starting to drag consumption down, latest EU data shows showing that real household consumption per capita fell by 0.8% in the first quarter of 2022, after a decline of the same magnitude in the previous quarter. At the same time, real household income per capita fell by 0.6% in the first quarter of 2022, after falling further by 0.6% in the fourth quarter of 2021.

Pessimism about the economic outlook is not limited to Europe. Startling data arrived this weekend from China where the official NBS manufacturing PMI for China fell to 49.0 in July 2022 from 50.2 the previous month, showing pessimism about the growth of the industrial production. The decline came amid sporadic shutdowns following a resurgence of COVID-19 cases in several Chinese cities and growing concerns about a darkening global economic outlook due to rapid monetary tightening by central banks.


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