Manufacturing beginning to look up in Greece

Manufacturing in Greece appears to be finding its feet, according to the June data from the Purchasing Managers Index (PMI).

The index, compiled by IHS Markit, showed on Wednesday only a fractional deterioration in operating conditions in the Greek manufacturing sector in June, as downturns in output and new orders softened substantially. Although client demand reportedly remained historically weak, the reopening of clients and key export markets following the loosening of Covid-19 restrictions aided sales.

The PMI index had a 49.4 points reading for June, up from 41.1 points in May, indicating a notably slower contraction in overall conditions across the sector compared to April’s nadir. The borderline between shrinking and expansion is 50 points.

Despite firms signaling a slower decrease in employment, a number noted that efforts to cut costs and lower new order inflows led to further job cuts. Nonetheless, the reopening of the economy spurred optimism at manufacturers. Meanwhile, companies continued to reduce their output charges due to efforts to boost demand amid lower cost burdens.

Hopes of a return to pre-pandemic new order volumes, the reopening of the economy and the acquisition of new clients led to optimism among Greek manufacturers, the first instance of positive sentiment since February. The degree of confidence was slightly below the long-run series average, but well below levels seen earlier in 2020. Pre- and post-production inventories continued to decline in June as firms used stocks to fulfill orders.

“The Greek manufacturing sector began to emerge from the chaos of the pandemic in June, as the contraction in production slowed to only a fractional rate. The reopening of factories, customers and the wider economy aided the marked slowing of the downturn. That said, firms continued to report generally weak demand, with output partially supported by the processing of backlogs of work,” said Siân Jones, economist at IHS Markit, which compiles the survey on Greece.

“Despite being much weaker than earlier in 2020, business confidence notably improved among Greek manufacturers. Optimism returned, as firms expect an increase in output over the next year,” the Markit economist added.