ECONOMY

Inflation strikes major blow

Economy reeling from soaring prices that increase business costs and slash consumption

Inflation strikes major blow

The impact of inflation on the Greek economy and society is growing heavier: Households are seeing their real incomes decline and fear unemployment in a new cycle of recession, while corporations are observing a drop in their profit margins due to the increase of production and operation costs and smaller sales volumes.

Worse, the phenomenon is not temporary, with the Foundation for Economic and Industrial Research (IOBE) noting in its latest survey on the economy published on Tuesday: “As the war goes on, with the sanctions on Russia and by Russia expanding, the negative effects on prices are not expected to decline in the coming months,” the Athens-based think tank concluded.

Therefore the economic sentiment index slumped in April to a 12-month low of 105 points, from 112.1 points in March.

Consumers in Greece are not only the most pessimistic in the European Union, bearing in mind the financial crisis of the previous decade, but consumer confidence has also returned to bailout-era levels: The confidence index dropped in April to a negative 55.3 points, from -51.4 points in March, which is considerably lower than the -38.4 reading in April 2021.

IOBE has found that job insecurity has returned and the intention to make large purchases has been significantly diminished as spending on energy, transportation and food grows, and the rate of consumers saying they are “barely making ends meet” rose from 56% in March to 65% April.

Key economic sectors also feel the negative effect as demand drops and costs soar. The latest Hellenic Statistical Authority (ELSTAT) figures show construction materials prices have jumped 10.2%, while business expectations in construction dropped in April to 132.2 points from 144.1 in March.

Expectations in retail commerce declined for a fourth month to 85 points, while NielsenIQ data showed a 1.4% annual reduction in supermarket turnover in Q1 2022. As for industrial output, S&P Global sees growth at only 1.4% this year.