ECONOMY

Greek PMI index falls slightly, indicating slower growth rate

Greece’s purchasing managers index (PMI) eased to 52.1 in December from 53.2 in November as the manufacturing sector expanded, but at a slower pace, NTC Research announced yesterday. The PMI index is a composite indicator of manufacturing business conditions, based on a survey of about 300 purchasing managers in the Greek manufacturing economy. The dividing line between expectations of recovery and expectations of contraction is set at 50. NTC said the rate of new business growth in Greece eased in December although foreign demand rose, as it has since September 1999, and order book levels grew at a less marked rate than in November. Input prices – the cost of raw materials and semi-manufactured goods – rose in December, continuing a trend seen throughout 2002. «Upward cost pressures intensified for the second month in a row as increased demand for raw materials provided suppliers with greater discretion when setting prices and the cost of oil rose sharply,» NTC said. Work force levels fell slightly for a third month in December, despite higher demand and production levels. NTC said, however, that the size of the Greek manufacturing labor force has been relatively stable since July. In the eurozone as a whole, the Reuters Eurozone Purchasing Managers’ Index fell to 48.4 in December from 49.5 in November. The survey, which was below the consensus forecast of 49.7, showed the steepest deterioration in business conditions in the eurozone since January 2002. «(The eurozone PMI is) disappointingly weak,» said Julian Jessop at Standard Chartered in London. «I think it’s going to be in sharp contrast to the equivalent US number this afternoon. I think the ISM is going to be back above 50 or so, showing that the USA continues to outpace Europe in economic recovery.» (Yesterday night, the USA’s Institute for Supply Management said its index of manufacturing business conditions rose to 54.7 from 49.2 in November, after three months of decline, blowing past expectations.) The eurozone index is being weighed down by the weakness of the region’s biggest economy, Germany. Manufacturers there have been heavily reliant on export demand, but in December export orders barely grew and the overall German index dropped to 46.9 from 49.0. The survey also includes France, Italy, Spain, Ireland, Austria, Greece and the Netherlands, covering about 92 percent of eurozone manufacturing activity. «The modest recovery in manufacturing seen earlier in the year has run out of momentum,» said NTC. «The PMI was dragged down by a slowdown in output growth to near stagnation, an increase in the number of job losses and the sharpest drop in new orders since January.» No move from ECB The weak numbers are likely to underpin expectations that the European Central Bank will keep its benchmark rate at 2.75 percent for the foreseeable future. The regional employment index fell to 45.5 in December from 46.3 in November, showing manufacturers cutting more jobs than they created for the 19th month running. The output index slipped to 50.3 in December from November’s 51.6. New orders dropped to 49.1 from 51.0. In Germany, NTC said the index fall reflected «the sustained weakness of the domestic economy, although the moderate strength of export demand which had been recorded in four of the previous six months was also seen to have evaporated in December.» The new export orders index for Germany fell to its lowest level for three months at 50.4 in December, partly reflecting renewed strength in the euro, which rallied from around $0.99 at the beginning of December to around $1.03 when the survey was conducted, just before the Christmas holiday. «(German) panel firms reported that tough global operating conditions had been exacerbated as a result of the recent strength of the euro versus the US dollar,» NTC said. The French manufacturing economy contracted for the third consecutive month, pushing the index down to 48.7 from November’s 49.6. However, manufacturers there reported some success in winning new export business from the Middle East, North Africa, Eastern Europe, Australia and New Zealand. The Italian index edged up to a four-month high of 51.1 in December from November’s 51.0, underpinned by the growth of new orders for the 12th successive month and expanding production. The stronger euro helped to hold down raw materials costs in the region and the eurozone prices index nudged down to 50.8 in December from November’s 50.9. «Although oil prices exerted upward pressure on costs in December, weak demand was reported to have helped manufacturers negotiate discounts with suppliers for many other raw materials,» NTC said.