The first private index for confidence in the economy

Companies involved in oil processing, metallurgy and computational techniques are the most upbeat in the entire industry with regard to orders, production and inventory in the first quarter of this year, shows the industrial confidence index calculated by an independent group of economists, the Applied Economics Group – Grupul de Economie Aplicata (GEA).

“The GEA index on industrial confidence is at 14.5% for the first quarter, which shows moderate confidence in the development of Romanian industry,” said Liviu Voinea, head of research with GEA. A similarly calculated index shows -7 for Hungary and -4 for the European Union.

The index is based on managers’ forecasts in relation to production, orders and inventory levels. The responses of 170 of the 400 firms questioned were used to compute the H1 index. “The 170 firms are representative of Romanian industry in terms of turnover distribution, numbers of employees, sectors of activity and location. The index is calculated using a standard methodology recommended by OECD and used by Eurostat,” he explained.

This is the first index to be calculated by a private institution. The only other similar kind of research into managers’ expectations in Romania is conducted by the central bank and the National Statistics Institute. Developed markets, however, normally have such indices calculated by independent institutions, which are closely observed by the business community, such as the IFO Business Climate Index in Germany.

“This is an indicator of market feeling, and is quite important for potential investors in the Romanian economy, as well as for companies operating in specific sectors. Being independent, it provides an alternative view of the development of the economy,” added Voinea. “This index is a novelty for the Romanian market. This type of analysis is highly valued in a market economy. We are not resorting to sufficient quantitative methods,” said the former minister of public finances, Daniel Daianu.

GEA is a non-profit organisation that was founded in June 2004 by nine young Romanian economists, who studied abroad, together with the Romanian Academic Society. It aims to provide independent research in applied economics.

The GEA index will be made public on a quarterly basis, at the beginning of the second month in each quarter. Data for the first quarter were collected during the December 15-January 15 period.
sorin.pislaru@zf.ro