Tanking the economic sentiment indicator - June 2026
Services moving aggressively into negative territory. Consumer confidence is basically at COVID level. Retail is sinking, but slowly. What a lovely summer.
No functional government for more than two months.
10y yields still high up though with recent improvement since the ceasefire in Iran.
It is enough to look at Hungary and compare our 10y yields to get a sense that things are not looking alright in Romania.
Certainly they are not, the forecasted economic growth is below 0,1% (a recession most likely), inflation still above 10% (though it will decrease in July and August when the statistical effect will expire) and unemployment keeps on rising. To make things worse.
Moody's just reconfirmed our negative outlook, leaving us hanging just one step above junk status. Probably we will not get there since we have the EU, we have funds coming in and we will get a good chunk of the SAFE loans for rearming Europe.
Moody’s is worried about the good chunk of government revenues we are going to spend on interest payment, forecasting them at 9,2% in 2026, only to go up to 9,6% in 2027. Basically, if you sum up the wages, pensions and interest payments, the government is left with little to no money to spend. If you look at our revenues, we are there, at the bottom-end of Europe, next to Ireland and Malta (tax heavens). We pretend to be a social state but behave the opposite.
Same old, same old, though we got a massive punch in the stomach on Monday when the Economic Sentiment Indicator (ESI) data was released by the European Commission.1 Romania tanked the ESI, pushing it from 90,8 the month before to 83,5 in June. The correction is, by far, the largest amongst EU nations, pushing us from somewhere at the tailgate, to right at the bottom of the barrel. No point in even trying to compare ourselves with other CEE nations, since Bulgaria is at 95,0.
The markets did not react to those news, signaling that it may be just a temporary shock given the raging anxiety in the country. 10y continued to slowly go down, though its value is still elevated. Growth forecasts were not further dragged down, so the signs may be correct, though I am hesitant to believe that it is just a passing moment and not something more serious we should be watching.
At a first glance, one may blame the situation on the industry, though, in the case of Romania, the INDU confidence indicator has been rather stagnant with little to no movement downwards. Sure, it is below 0, sure there are pessimistic expectations about future orders, though it is nothing massive that happened in June which shocked this segment of the economy. Perhaps we will see an adjustment here in July following the news about VW slashing 100.000 jobs. Perhaps.
The June correction came primarily from Services (30% weight) which went down from -6,3 the previous month to -23,8. Services have been in the negative territory since the late months of 2025 after VAT was raised and further measures to limit consumer spending were enacted (wage freezes, pension freezes, etc).
Since the end of 2025, the sentiment in Services has been going down, though June is something of a kind: a literal sinking, pushing it to such low depths, that is not that far away from the consumer confidence indicator (they have never been optimistic).
Oh, that one, the consumer confidence indicator (yellow line - CONS) which has been around -35 for the past months since the country decided to go full on political crisis mode. In May 2025 we attempted to rerun our Presidential elections, the far-right guy won, the government resigned, and then the rest is history. August 2025 brings austerity and the sentiment has not recovered since.
Politicians are trying to cling on this subject, promising to bring consumption back into growth territory, though glancing at the current account balance makes those promises wither in thin air. Oops.
The consumer confidence indicator has little to no chance of recovery at this moment though there is some hope in July after the minimum wage will increase from 4.050 lei to 4.325 lei. We can only hope, but things do not exist in a vacuum and that small increase in the minimum wage will not outweigh the political crisis and the overall slowdown in consumption. Again, not an accident, but a political project to move away growth from import-driven consumption.
I did not expect Romania to get back above the 100 threshold, though I did not wake up on Monday thinking it will go below 85. Sure, we are seeing a contraction in services (more on that later), but nothing of the kind that the data here is signaling. I was expecting to see Retail going further down into the negative territory, though it is floating above Services now.
When we look at the indicators for the Services sector, the situation is getting worse and I keep on wondering if it is just an error that will be later corrected. I can only hope.
Basically “Business situation development over the past 3 months” stood at -4,2 in May, only to reach -24,7 in June. That is surprising and leaves me thinking that the 30 days between the surveys basically ravaged the Services economy.
A crazy correction, it may be the case, though in the revenue volumes data for consumer services, the y/y contraction (seasonally adjusted) is 9,5% in April 2026. For the business-facing services, we have a y/y contraction (again, seasonally adjusted) of 3,5% in April 2026. When those contractions were registered, the May confidence indicator for Services stood at -6,3.
In a month we will get a sense of what is really happening there when the data will be published, though for now we are left pondering one of the worst corrections in the ESI after the COVID-19 pandemic.
Oh, we still have no functional government and after two attempts at forming one, we are still wondering who actually wants to rule this country. Perhaps this is why the sentiment is tanking, since anxiety is raging in the streets and those with power pretend like they have none.
See you soon. Sorry for my absence, been busy teaching young journalists about inflation. Will write here more often.
Funny or not, I was just preparing a slidedeck on the May data on the same day. Sent it to my clients, only to e-mail them hours later saying: IGNORE IT, it got worse.