Macro roundup: Bitter pills and lockdowns

Europe's manufacturing rebound remains elusive for Greece

For a few months now it’s been clear that the effects of the coronavirus recession have been lingering longer in Greece than they have for the rest of Europe. IHS Markit’s Purchasing Managers’ Index for October — a survey of sentiment in the sector — is one more sign of this, ahead of the country going back into lockdown this weekend.

Having barely got back to a level in September corresponding to manufacturing output standing still instead of contracting, the index dipped again for the most recent month as the virus’s resurgence across Europe led to falling new orders. The food sector — which makes up a big part of Greek manufacturing — seems particularly hard hit.

What makes this a bitter pill to swallow is that the PMI numbers for the rest of the eurozone in October showed manufacturing was booming as it rebounded from the spring lockdown, with new orders growing at rates never seen before in Germany. Of the eurozone countries covered by the PMI survey, Greece is the only one that was contracting in October.

When Greece entered the first lockdown in March, it did so with economic confidence riding higher than the rest of the eurozone. It enters the second lockdown in a more vulnerable position.

Lessons not learnt

Simon Wren-Lewis wrote a blogpost this week excoriating Europe for failing to act more quickly after coronavirus cases started rising in September. I would normally add it to the further reading section of the newsletter, but for our purposes I wanted to recreate his charts — from Our World in Data — with Greece added to them.

The first chart looks at the virus’s spread in a range of countries where it has been raging, with Japan also included for comparison. Viewed in this light the number of cases in Greece remains relatively low.

The second chart looks at Germany and the Scandinavian countries. This comparison is less flattering. An alarming aspect from a Greek perspective is that the slope of the curve suggests Greece might overtake Denmark and Germany in the coming days.

The most sobering comparison is with countries in East Asia, Australia and New Zealand. Wren-Lewis kept Finland, as the best-performing Scandinavian country, for comparison.

Throughout this year, as it introduced and removed measures, Greece’s government stuck closely to whatever has happened to be the general practice through most of Europe. Given the late spread of the virus to Greece, the general practice was enough to nip it in the bud during the first lockdown. But the government was still quick to lap up plaudits for its handling of the situation.

The trajectory of this second wave, where Europe’s response has turned it into the pandemic’s epicentre once more, should now prick the myth that the government has been doing anything exceptional.

Other data

  • The unemployment rate in August fell to 16.8 percent from a revised 17 percent.

  • The total value of imports-arrivals in September dropped 16 percent, while the value of exports-dispatches fell 10.6 percent.

  • The European Commission has released its autumn forecasts. For what it’s worth in these times, it now sees the Greek economy contracting 9 percent this year, revised from 9.7 percent in their spring forecast. The outlook for 2021 is gloomier, with the GDP seen rebounding just 5 percent instead of 7.9 percent.

If you’re enjoying this newsletter, consider sharing it with others who might also like it.

Share Grecology

Next week’s key data

  • September industrial production (Elstat)

  • October consumer price index (Elstat)

  • August building activity survey (Elstat)

Elsewhere on the web

  • Improve public support for EU funds by making them permanent

  • Here is what the officials responsible for making the Commission’s forecasts see as the key takeaways

  • Peace activists see hopes fading for a unified Cyprus

I’d love to get your thoughts and feedback, either in the comments, on Twitter or by reply if you received the newsletter by email. If you’re not subscribed yet, consider doing so now.