ECONOMY

Manufacturers alarmed over input prices

manufacturers-alarmed-over-input-prices

A steep rise in production costs is undermining competitiveness, shrinking profit margins and could lead to a new recession cycle in the long term, as high market prices could hit demand, Greek manufacturing managers warn.

“In all my years as a professional, I have never observed such steep increases in the prices of primary materials and transport costs in such a short time,” Dr Kyriakos Loufakis, chairman and CEO of Loufakis Chemicals, president of the Thessaloniki Innovation Zone and a former vice president (2010-14) and president (2014-18) of the Greek Exporters’ Association, told Kathimerini.

The price hikes have already created inflationary pressure. They are also threatening to derail Greek manufacturing’s rebound, he said.

On the surface, there’s a lot to cheer about: According to yesterday’s announcement by international data and analytics provider IHS Markit, Greece’s Purchasing Managers Index rose to 59.3 in August from 57.4 in July, the fastest rise in 21 years.

A PMI index over 50 signals that purchasing managers expect expansion, while an index below 50 reflects expectations of contraction.

“Overall growth was supported by sharper expansions in production and new orders. Client demand from new and existing clients strengthened as firms stepped up their purchasing activity and hiring,” IHS Markit remarks.

Nonetheless, input costs are rising and, at the same time, there are significant delays in the delivery of primary materials.

“Although easing from the highs seen in June, inflationary pressures remained historically elevated amid seemingly relentless supplier shortages and delays in material deliveries. Our current forecast expects marked increases in producer prices to feed through to overall consumer prices as 2021 progresses,” said Sian Jones, senior economist at IHS Markit.