Bulgaria's business climate weakens again in October: services and industry slip as labour shortages bite

What happened

Bulgaria's total business climate indicator fell by 2.1 percentage points in October 2026, from 15.3% to 13.2%, according to the National Statistical Institute (NSI) survey reported by BTA. It was the second monthly decline in a row, after a fall of 1.3 points in September. Sentiment weakened in industry (down 2.8 points) and most sharply in services (down 6.9 points), was broadly unchanged in construction and improved in retail trade (up 1.2 points).

The European Commission's survey for Bulgaria, published on the same day, points in the same direction. Its Economic Sentiment Indicator (ESI) for the country fell from 97.8 in September to 94.8 in October, against a long-term average of 100.

The figures and background

In industry, the NSI composite indicator dropped from 16.9% to 14.1%, its lowest level since April, according to Trading Economics data published by TradingView. Managers' assessment of the current business situation fell from 20.5% to 15.7%, and the balance for current production orders worsened from -20.7% to -22.3%. Production expectations for the next three months eased from 7.7% to 6.0%, and for the next six months from 13.4% to 12.5%.

The list of obstacles is revealing. The share of industrial managers citing labour shortages rose from 31.2% to 36.4%, ahead of uncertain domestic demand (26.9%, up from 24.8%) and insufficient foreign demand (24.3%, up from 22.4%). Financial problems were cited by 5.8%, up from 4.8%. At the same time, expectations for selling prices rose from 12.5% to 16.5%, which suggests that more firms plan to pass on costs rather than absorb them.

In construction the indicator was little changed, but builders expect fewer new orders over the next six months and a short-term contraction in activity, BTA reported. Services companies, the largest drag this month, were less positive about both their current situation and demand.

The longer view matters. In October 2025 the NSI total indicator stood at 16.1%, according to the Bulgarian Chamber of Commerce and Industry's Infobusiness, so the latest reading is about 3 points lower than a year ago. On the Commission's measure, Bulgaria's ESI was 101.1 in November 2025 and 100.4 in January 2026, fell to 94.4 in April and recovered to 97.8 by September before this month's drop. The lowest point of the series since 2000 was 54.0 in April 2020.

How Bulgaria compares

In both the EU and the euro area the ESI fell by 0.6 points to 96.9 in October, its second monthly fall, the European Commission said. Bulgaria's drop of 3.0 points was therefore five times the EU average and leaves the country below the EU level. In the region, Romania's ESI eased from 92.2 to 91.6, Greece's from 107.6 to 106.9 and Croatia's from 108.0 to 105.8, while Hungary's rose from 99.9 to 101.0. Slovenia fell to 98.0 and Germany, Bulgaria's main export market, to 94.1.

The Commission's sector data for Bulgaria show consumer confidence slipping from -26.0 to -29.1 and services confidence from 9.1 to 6.0, with industry at -4.5 and retail improving from 9.0 to 11.4. One figure stands out: Bulgaria's Employment Expectations Indicator was 103.4 in October, little changed from 103.3 and above the EU reading of 98.9. Firms have become more cautious about demand, but not yet about hiring.

The external backdrop is weak. Bulgarian industrial output fell by more than 9.4% year on year in August, the third-steepest decline in the EU, and exports to Germany dropped by 7.5% in the first half of 2026, Novinite reported, while exports outside the EU rose by 4.4% between January and August. The same report said that about 15% of planned fixed investment had been frozen this year. Higher energy costs, covered in yesterday's InvestBulgaria analysis, add to the pressure on manufacturers.

What it means for investors and companies

For exporters selling into the EU, the survey combines weak foreign orders with a tight labour market. Rising wage and energy costs at a time of soft demand point to pressure on margins, and the Novinite report describes firms looking for markets outside the EU. Companies with a broader customer base outside Germany and Italy appear less exposed.

Labour remains the binding constraint. More than a third of industrial managers now name staff shortages as a main obstacle, more than name domestic or foreign demand. Together with steady employment expectations, this suggests continued wage pressure and makes automation and productivity projects more relevant for manufacturers and for investors assessing new plants.

Price expectations are the second signal. The rise in Bulgarian industrial selling price expectations matches an EU-wide pattern: the Commission reported that selling price expectations rose by 3.4 points in industry, 2.8 points in retail, 2.4 points in construction and 2.1 points in services, while its Economic Uncertainty Indicator climbed by 1.7 points to 19.8. Buyers of Bulgarian goods and services should expect more price negotiations in the coming months.

For consumer-facing businesses, the fall in consumer confidence to -29.1 is a warning, although retail sentiment improved in October. Builders and building materials suppliers face a softer order outlook, which matters for developers planning launches in 2027.

What to watch next

The European Commission will publish its next Economic Sentiment Indicator on 27 November 2026, with a flash consumer confidence estimate for the euro area on 20 November. The NSI's November business survey is expected at the end of November and will show whether October marks a turning point or a temporary dip. Industrial production and export data for September, together with any decision on business electricity compensation, will indicate whether the weakness in industry is spreading.