Macro roundup: Manufacturing doing fine
Greece's March PMI reading was the highest for 10 months
Greece's purchasing managers’ index reading for March paints a sanguine picture for the country’s manufacturing sector, with price pressure easing, new order growth accelerating and output expanding.
The PMI indicator is a survey, conducted by S&P Global, that gives a more immediate picture of operating conditions in the manufacturing sector than official data sources, which come with a greater lag. This weeks reading of 52.8 is the second straight month above 50, the level that signals expansion.
According to S&P Global’s report, manufacturers are saying that they see an increase in new orders and demand is strengthening, while inflationary pressures are easing as costs increased at their slowest rate since July 2020. S&P Global predicts Greece’s consumer price index will rise 4.3 percent this year — a marked deceleration from last year’s 9.3 percent.
Cross-referencing against industrial production statistics from the Hellenic Statistical Authority, manufacturing output in fact never dropped over the winter. The dip in industrial production that did happen was due to reduction in electricity supply. Manufacturing growth stayed positive, increasing 8.4 percent from a year earlier in January. February data will come out next week.
This picture is a contrast to last week’s roundup, where we noted a tightening monetary conditions. Granted, manufacturing is a relatively small proportion of the Greek economy, and the European Commission’s business survey showed a worsening of sentiment in industry in March. Nevertheless, the data suggests that the tightening isn’t damaging the manufacturing sector in Greece, so far.
Some readers will be aware that I’m sceptical of the notion that central banks can gently finesse inflation through interest rates, like turning the dial on a thermostat. I stand by that view, but whether its by design or by accident, this is the kind of scenario that central bankers would hope for.
Meanwhile, Bank of Greece governor Yannis Stournaras this week said that the European Central Bank’s tightening cycle is nearing its end. Stournaras has been a quite vocal voice representing the doves on the ECB’s Governing Council, so I’d expect some of his colleagues might disagree. But hopefully if the central bank puts its foot on the brake now, it will be soon enough to prevent an accident.
Where the tightening is being felt most keenly is from borrowers, and the pressure was enough that it was reported this week banks will freeze mortgage rates for a year.
A month ago I noted that the with the spread between lending and deposit interest rates at record levels, bank profits could become a political issue. In truth I didn’t thing it would become one in these elections, but then Pasok’s leader, Nikos Androulakis, picked it up this week.
With multiple elections in Greece’s immediate future, we’ll keep an eye on what the politicians are saying in the weeks to come.
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Greece’s trade deficit improved again in February, shrinking to 2.26 billion euros, compared with 3.33 billion euros in the same month of 2022.
In the first two months of the year, the trade deficit was 4.63 billion euros, a 27.2 percent reduction from last year
That was largely thanks to a 25 percent rise in exports to 8.88 billion euros
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Next week’s key releases
Monday, April 10:
March consumer price index (Elstat)
February industrial production (Elstat)
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