Last week we had a flurry of data releases for Romania. If we were to use one word to describe the view about the economy from these data it would be: worrisome. In the same time the data should not surprise as the beginning of the year was hit by bad weather. However, the data, as bad as it wass, should have been expected as over the last 36 months Romanian economic policies were not designed to promote (short or long term) growth. Over this period the evolution of the economy was mainly driven by the dynamic of the EU27 economy.
Now the data.
Last week we had the release of both industrial and consumer prices. Both continued their slowdown started in the summer of 2011. A lot of the result comes from the base effect (high growth rate in the previous year). In the same time as you will see with production data the start of the fall in prices coincides with the start of the fall in production and new orders. However, over the same period the GDP deflator (general prices in the economy) kept rising for no apparent reason.
Regarding industrial production and new orders the data for the first 2 months consolidated the downward trend for both indicators. However, it is very important to note that the slowdown started at the beginning of 2011 and accelerated since July of last year. The dynamic of industrial production is the biggest worry of this data releases as it still gives the most important contribution to the overall GDP.
The weak economy is seen in the labor market also with the number of unemployed people still around 700 thousands (7.1%) while the number of employed people is stuck at the lowest number over the last 11 years. And as I was saying here most of the cost of the weak economy is born by the private sector.
Finally, there was new data on trade for Romania. There are two important things to mention here. First, the value of both imports and exports are falling while the trade deficit is increasing. This is further evidence that the economy is weak and weakening further (next graph). Second, the value of trade is following the EU27 dynamic and thus as they are dealing with a recessionary economy there will be no outside help for the Romanian economy (second graph). The only help could come from domestic economic policies.