Greece is stuck between a rock and a hard place. The extended negotiations between the government and the representatives of the eurozone and the International Monetary Fund have strangled consumption in Greece, as the delays in the completion of the second review of the country’s third bailout are generating uncertainty among households and enterprises. However, when the review is finally wrapped up, as is expected, it will almost certainly come with new fiscal measures that will shrink disposable incomes further. It therefore comes as no surprise that the consumer confidence index recorded by the Foundation for Economic and Industrial Research (IOBE) dropped further last month, to -74.4 points, from -73.3 points in February.
Last month’s level, announced by IOBE on Monday, was the lowest since September 2013.
Consumers’ projections regarding the state of their household finances in the next 12 months deteriorated further in March, taking that index to -69.1 points, from -67.8 points in February. Similarly, consumers’ forecasts about the financial state of the country in the year ahead were at -80.1 points, against -78.3 points a month earlier.
The new tax load and increased social security contributions since the start of the year, along with much in the way of household savings already having been exhausted, led the index gauging intent to save money to a historic low of -86.1 points, against -84.2 points in February. The share of households that said they just about make ends meet rose from 61 percent in February to 63 percent in March. The share of those who said they use their savings dropped from 17 to 12 percent in just a month.
These trends are also reflected in retail business expectations, the only sector where businesses appeared more pessimistic in March than in February.
In total the economic sentiment index rose to 93.4 points last month from 92.2 points a month earlier, which IOBE attributes to more positive forecasts about the course of exports of goods and services.
However, another index, the Purchasing Managers Index (PMI) compiled by Markit, showed a further deterioration in March, with its reading at 46.7 points from 47.7 points in February. The borderline between growth and index in this sector (manufacturing) is 50 points. The drop in new orders accelerated, mainly due to fewer export orders.