Macro roundup: Poised for a recovery

Greece's Q1 GDP data suggests growth this year could be stronger than expected

Greece first-quarter GDP print was undoubtedly much stronger than was widely expected. Gross domestic product grew 4.4 percent from the previous quarter, when it expanded an upwardly-revised 3.4 percent. The year-on-year contraction was restricted to 2.3 percent.

The usual caveats apply, of course, and we’ll come back to them later. But the narrative had been that the first quarter would be when the economy suffered a huge toll from the lockdown, before bouncing back in the second half of 2021.

The main growth drivers in the first quarter were exports and inventory effects, as private consumption continued to contract. Fixed investment grew 3 percent in the quarter, and 8.6 percent from a year earlier. That’s exactly the thing you love to see in GDP data, so more of that please.

To put today’s data in perspective, as of early May, the median estimate from eight private sector economists, according to Bloomberg, was for a year-on-year contraction of 9.2 percent. The most optimistic of these was for a contraction of 8.5 percent.

In light of this data, as well as strong business survey data in the last month, forecasts of growth this year in the 3.5 percent to 4 percent range are beginning to look a little conservative (barring renewed lockdowns from more Covid waves).

Now for those caveats. Greek GDP data gets revised A LOT from one release to the next. Seasonal adjustment has long been tricky (for several years in the 2010s Elstat stopped publishing seasonally-adjusted data altogether). It gets a hell of a lot trickier when you throw a pandemic into the mix that disproportionately affects the highly seasonal key sector.

It’s worth bearing that in mind when considering that the 4.4 percent quarter-on-quarter growth rate was the highest so far reported in the EU (by a distance — the next highest is Romania’s growth rate of 2.8 percent).

A measure of how much noise there is in the data is that when you sum the contributions to growth of the individual expenditure components, the total only comes to 2.3 percent.1

Last year’s third quarter data was weak for Greece — at a time when other economies were rebounding as they came out of lockdown — because of the hit to tourism.

In an imaginary world in which it were possible to always perfectly account for seasonal effects, under any scenario, Greece would deviate less from the European average because the loss from tourism would be evenly distributed across quarters. In the imperfect world that statistician have to measure, at least part of the outperformance in the last two quarters should be seen as the flip side of underperformance in that third quarter.2

A few other things are worth noting about the revised data for earlier quarters.

Although the annual time series won’t be revised until later in the year, summing the quarter figures now suggests that GDP contracted 7.8 percent in 2020 even less than the 8.1 percent previously reported (a figure which itself was regarded as better than expected).

But the data also shows that the contraction in the first quarter of last year was the third straight drop in output, so the economy was already technically in recession at the outbreak of the pandemic. While there’s noise in the data, what trajectory the economy would have taken if not for Covid is an interesting counter-factual.

Other data

  • As mentioned earlier, recent survey data has been strong. In May, the manufacturing PMI rose to a reading of 58 from 54.4 in April (a reading above 50 indicates an improvement in operating conditions). Last month’s reading is the strongest in 20 years.

  • The expansion of bank credit to the private sector slowed to an annual rate of 2.4 percent in April, from 2.9 percent the month before. Monthly net flows turned negative, with a decrease in lending of 787 million euros. However, flows to small and medium-sized enterprises were stronger, with an increase of 564 million euros. We took a closer look at this a few weeks ago, and that’s a high reading — more, in fact, than March 2020, at the start of the first lockdown.

  • Private sector deposits continued their upward march in April, increasing another 2.96 billion euros. That’s the biggest monthly increase since December.

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

Share Grecology

Next week’s key data

Monday, June 7:
  • April data on exports and imports (Elstat)

Thursday, June 10:
  • May consumer price index (Elstat)

  • May industrial production (Elstat)

Friday, June 11:
  • March building activity (Elstat)

  • March unemployment (Elstat)

Elsewhere on the web

  • Chris Marsh, on his General Theorist blog, has a really sharp post on Keynesianism, monetarism and the mistakes of modern macroeconomics. A few weeks ago, I made a passing comment in the newsletter linking rising household deposits with disposable income and consumption trends. While the connection is obviously true, it doesn’t tell the whole story, and it ignores the monetary drivers behind the process. Chris’s post nicely explains those links.

  • The European Commission this week released its 10th post-programme enhanced surveillance report, while the IMF released its statement for the conclusion of its Article IV consultation for Greece. Both worth a read.

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.


To be clear, there is nothing untoward in this discrepancy. It exists because for constant-price GDP data, chain-linking of each component is applied separately. Over the course of the series, going back to 1995, these discrepancies average out to zero, as you’d expect. The standard deviation of these discrepancies is 1.5 percentage points.


This effect is especially strong in the first quarter, which on a non-adjusted basis is always the season with the least economic activity. Through seasonal adjustment, you’re effectively depressing already depressed tourism revenue in the third quarter, and “redistributing” it to the first quarter. So what was, on a non-seasonally adjusted basis, a 3.9 percent quarterly drop in the export of services in Q1 becomes a 6.2 percent increase after seasonal adjustment is applied.