Macro roundup: Deflation deepens

Prices fall; monthly industrial production stabilises; unemployment numbers messy

A few more data releases are beginning to fill out the picture of the pandemic’s deflationary macroeconomic impact.

Where the trajectory of consumer prices is concerned, we’re seeing a gap opening up with the rest of the eurozone that’s reminiscent of a few years ago. But there are also some signs of stabilisation in industrial production and even in the labour market, depending on where you look.

Falling Prices

Greek consumer prices dropped 1.9 percent in June from a year earlier, putting the country back into the kind of deflationary territory last seen in 2015.

The main driver of falling prices in Greece, as with the rest of Europe, is the collapse in energy costs this year. But the eurozone as a whole actually saw a slight uptick in June, with prices increasing 0.3 percent after being on the cusp of deflation in May.

Unemployment Havoc

The jobless rate rose to 15.5 percent in April, though it’s still below February’s rate as the latest data partially just reverses a plunge in March.

Frankly, making sense of the data is messy right now. This whole period can be considered something of an anomaly given the way pandemic responses have interfered with categories used to compile the statistics.

With that in mind, it’s worth also noting some other labour market projections and indicators this week:

  • The Labour Ministry’s Ergani database showed an increase in net hirings in June. This comes with some caveats, but it’s a sign of some stabilisation.

  • The OECD forecasts that the jobless rate will increase 2.3 percentage points this year. That’s less than the average for its members.

All in all, it’s fair to say unemployment is rising, but this is showing up in the Elstat data right now more as an increase in inactivity.

Beneath the headline numbers — and noting that this could be due to seasonal-adjustment effects adding an extra layer of distortion — some of the biggest swings are showing up in the islands, which are most heavily dependant on tourism.

In Crete, unemployment jumped to 23.6 percent in April from 11.5 percent in March. In the Aegean, the pandemic’s distorting effect on the data is most apparent: the jobless rate dropped to 6.8 percent in March from 13.9 percent in February, before springing right back up again to 15.9 percent in April.

Industrial Production

Elstat released May industrial production data on Friday, recording a drop of 7.5 percent from the same month a year earlier, with the biggest decline coming in mining and quarrying. Manufacturing fell 8.4 percent.

The hit was to be expected. But the data at least confirms that the sector has stabilised since April, when industrial production fell 10.2 percent. On a seasonally-adjusted basis, this translated to a 0.9 percent increase in production in May from April.

Next week’s key data

  • Elstat releases the Building Activity Survey for April

  • The Bank of Greece releases the second-quarter bank lending survey, which will provide more insight on credit conditions during the pandemic

  • The Finance Ministry should release the central government’s preliminary budget execution for May (the precise day isn’t always dependable, but lately they’ve been fairly consistent about releasing it on the 15th of each month)


Elsewhere on the web

  • Euro-area finance ministers have chosen Ireland’s Paschal Donohoe to head the Eurogroup. Sadly, it’s something of a coup for countries that are part of the so-called New Hanseatic League.

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