Economic sentiment in Romania recovers in May despite lower consumer confidence

The economic sentiment indicator (ESI), reflecting the expectations regarding the economic situation, improved in May in Romania due mainly to better confidence in services sector, but consumer confidence continues to be weak, according to the European Commission.

ESI is a composite indicator made up of five sectoral confidence indicators with different weights – industry, services, consumer confidence, construction and retail trade.

ESI in Romania rose from 100.6 in April to 102.8 in May, a 3-month high. Industry index increased from 0.0 to 0.2 in May, services from 6.1 to 10.2, retail trade from 6.5 to 9.6, while construction index improved from -15.2 to -13.9.

Consumer confidence index declined from -23.2 in April to -24.3 in May.

“Consumer confidence fell as most people seem to expect a deterioration in their financial situation going forward, though the tight labor market is still making them feel secure about their job prospects,” ING analysts said in a research note.

However, the ESI for Romania declined rapidly during the last year, from 105.1 in June 2017.

“A flash GDP reading showed growth was flat in 1Q18 and it looks as though the economic data has been catching up with weaker soft data this year. Still, a stabilization in Eurozone confidence in the second quarter offers some backstop to the Romanian economy,” ING analysts point out.