Macro roundup: GDP expansion

Rising imports were a drag on Greek economic growth in the fourth quarter

Mar 04, 2022

Greece’s economy grew 8.3 percent last year, though it still hasn’t quite recovered to its level of 2019, the last year before the pandemic.

That’s not surprising in itself as the country began 2021 in lockdown, so it was only in the second quarter that the recovery began to take hold. But pace of growth slowed down in the fourth quarter compared with the middle part of the year, when the economy was buoyed by a sharp consumption rebound and a better than expected performance for tourism.

Gross domestic product grew 7.7 percent in the fourth quarter on a year-on-year basis, compared with a growth rate of 11.4 percent in the third quarter and 15.1 percent in the three months before that. On a quarterly basis, GDP growth slowed to 0.4 percent in the fourth quarter from 2 percent in the third quarter.

On an annual basis, net exports were a drag on on annual GDP growth in the fourth quarter, with increasing goods imports being the main culprit.

Although the seasonal adjustment effects and deflators applied to specific GDP components make it hard to parse exactly what’s going on in Greece’s national accounts data, it’s a fair guess that the slowing pace of growth in the fourth quarter is a result a deterioration in Greece’s terms of trade due to higher energy prices. Unfortunately, that’s something that will continue to be a drag into 2022.

Other data

Retail sales increased an annual 23.8 percent in December, a jump from November when the rise was 10.2 percent. Volume increased 19.4 percent. Clothing and footwear sales surged 132 percent.
The manufacturing purchasing managers index dipped slightly to 57.8 from 57.9 in February. With a reading above 50 signalling improving operating conditions, its sill well into expansionary territory. New-order growth slowed for a sixth month, though input price inflation eased to a six-month low.
The producer price index rose 31.6 percent in January from a year earlier, compared with an increase of 29.4 percent in December. Energy prices continued driving the increases, rising an annual 61.5 percent in January.
Building activity in November, as measured by the number of permits issued, increased 42.9 percent compared with the same month in 2020. Activity in the first 11 months of last year increased 27.5 percent.

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Next week’s key releases

Thursday, March 10:

February consumer price index (Elstat)
January industrial production (Elstat)

Elsewhere on the web

The financial fallout from the war in Ukraine is one of those monumental shifts that sweep aside many of the previous narratives that we’ve been looking at. A lot’s been written about it in the past week, but Duncan Weldon has helpfully already done a job of rounding some of it up.
For Greece, among the things that may change, there could be more leeway when it comes to fiscal tightening in 2023.
Meanwhile, Harold James and Brendan Greeley look at the history of Russia’s gold fetishism.
The Levy Institute has released a strategic analysis of Greece’s macroeconomic prospects for the next couple of years. One thing I find novel in their approach is that their analysis is underpinned by a “New Cambridge” model, of the kind pioneered by Wynne Godley, one of my favourite economists.
The Bruegel Institute has an analysis on Europe preparing to wean itself off Russian gas.

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