Macro roundup: Temperature check
Business confidence is improving even though the Covid situation remains bleak
For all the consternation at the slow vaccine rollout and the terrible infection and hospitalisation numbers, the latest round of business surveys in Greece hints at a growing sense that people view the end in sight.
The purchasing managers index for March suggested an improvement in operating conditions in the manufacturing sector for the first time since February 2021 (perhaps misleadingly). Meanwhile, the European Commission’s economic sentiment survey showed an improvement in all sectors last month.
That’s an improvement from a low level, and economic sentiment in Greece does lag behind the euro-area average. Having entered the current crisis at a higher point in its economic cycle, and then drawing plaudits for containing the spread of the virus in its first wave, sentiment in Greece didn’t drop as much as it did elsewhere. But after that first wave confidence didn’t rebound as sharply either.
Still, it’s only the second time since the start of the pandemic that confidence improved in every of sector. Construction in particular is riding a wave, as the only sector where sentiment is even higher than it was before the crisis.
The improvement in IHS Markit’s headline PMI reading to 51.8 in March, from 49.2 the month before, is notable for being the first time since the crisis that the reading has been above 50 — the key level that indicates an improvement in conditions.
But beyond that, any comparison with the rest of the euro area makes for more depressing reading. Manufacturing elsewhere is in the midst of a rebound boom, with record increases in output, new orders, exports and purchasing activity. The eurozone reading of 62.5 is the highest recorded in nearly 24 years of data collection.
Greece, by contrast, is still seeing contractions in output and new orders, even if the rate of contraction has eased and business confidence is improving.
But the thing that is most alarming is that it appears the element that pushed Greece’s reading into growth territory is the lengthening of supplier delivery times. This contributes positively to the index because, under normal circumstances, it indicates that a strong economy is putting pressure on vendors, who are struggling to keep up.
These are not normal times, however, and the supply chain disruptions the world is experiencing are not a sign that business is booming. Perhaps I’m projecting here, but it seems like there is an almost apologetic tone in the release at reporting an index reading above 50, with Markit’s own findings suggesting that Greek manufacturing remains in the doldrums.
It’s been a light week for economics releases. The main one left to report is that retail sales in January dropped 5 percent, following December’s drop of 12.8 percent.
The week’s big economic news was the government unveiling its “Greece 2.0” plan for using 30.9 billion euros of EU recovery funds by 2026, which it hopes to almost double to 57.5 billion euros by harnessing capital from the private sector.
You can read the full list of about 170 projects and reforms here, in Greek.
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Next week’s key data
February imports and exports (Elstat)
March consumer price index (Elstat)
February industrial production (Elstat)
Elsewhere on the web
Christian Odendahl and John Springford of the Centre for European Reform argue that Europe should spend it like Biden.
Drawing lessons from the 1994 Great Bond Massacre, Dimitris Valatsas argues that non-US central banks must protect their countries from the rate cycle
Goldman Sachs economists have looked at a millenium of macroeconomic data to conclude that inflation tends to be weak after a pandemic
John Psaropoulos on the godfathers of Greek independence
And finally, how rich was Cleopatra? (spoiler: very rich)
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