Greek industry has been so cash-starved that it is unable to fully capitalize on the increase in domestic and international demand and the gradual return of credibility in the Greek economy. In the absence of cash reserves, manufacturing companies are unable to purchase raw materials, hire additional employees or deliver orders in a timely manner.
These are the features recorded in a Purchasing Managers Index (PMI) survey conducted by Markit. The survey found that after the recovery registered in the first couple of months of 2014, the index returned below the growth threshold of 50 points in March to 49.7 points, compared with 51.3 points in February.
This development is characterized as “rather disappointing” by Markit economist Phil Smith, author of the Greek PMI report. He nevertheless added that “the main indices that relate to output and new orders have remained on a growth level – albeit below the February highs – showing that the manufacturing sector has had a positive contribution to the country’s gross domestic product in the first quarter of the year.”
Smith added that the March survey again highlighted the degree to which the shortage of liquidity and cash reserves has been hampering the operation of enterprises in general, so that not only job creation is affected but also the markets, stocks and deliveries. He concluded by noting that “the recovery of the manufacturing sector requires progress on this front.”
The Markit analysis showed that March saw a further increase in output and new orders although the growth rate eased, while there was a decline in orders destined for markets outside Greece. A slide was also recorded in employment levels, which some entrepreneurs attribute to the lack of available cash.
Due to the increased demand in recent months, stocks of ready products have shrunk at the fastest rate recorded in the last two and a half years.
Another obstacle to Greek manufacturing securing satisfactory liquidity is that it is forced to sell at particularly low prices in order to retain competitiveness. Factory prices dropped again in March, as has been the case every month since March 2011, albeit at the slowest pace since the start of this year, according to the Markit survey’s findings.