Manufacturing output contracted 2.3 percent in March as bad weather disrupted production lines and the imminent launch of war in Iraq depressed new orders and slowed down exports, figures released by the National Statistics Service (NSS) yesterday showed. Construction activity, in contrast, continued to grow at a robust pace in January, with the boom sustained by low interest rates. The slide in manufacturing production, however, was smaller than the 5 percent decline recorded in the previous month. «The March drop was smaller than expected,» said Dimitrios Maroulis, economist at Alpha Bank, who had predicted a bigger decline based on the slump in the purchasing managers’ index (PMI) in March. The PMI fell to 47.5, ending 15 months of consecutive expansion, as the war in Iraq dampened export orders. Manufacturers, however, reported increased output and purchasing activity as they stocked up diminishing inventories. Bad weather rather than war jitters contributed to the manufacturing contraction in March, Maroulis said. «The food and beverage component is a significant indicator of the weather effect. Usually, it shows a 2.5-3 percent increase while a decline would be due to bad weather. The subindex fell 2.7 percent in March,» he said. Manufacturing output in the first quarter fell 0.9 percent. The manufacturing sector could shrink by as much as 4 percent in April due to the Easter celebration, which reduced the number of working days in that month, Maroulis predicted. He said prospects for the overall year, however, indicate a slight expansion of around 1 percent, the sixth in a row. Industrial production edged up 0.8 percent in March against a 0.7 percent rise in the previous month, as the hike in energy and water output outweighed the manufacturing and mining decline, NSS data showed. Production of electricity, natural gas and water rose 11.8 percent against a 9.9 percent drop in mining activity due to bad weather. Energy and water output rose 6.6 percent in the first quarter while mining production fell 11.2 percent. The construction sector continued to shine as volume-based activity rose 11.6 percent in January. «The sector has always been robust. Much of it has to do with low interest rates,» said Maroulis. Mortgage lending grew at a rapid 35.6 percent last year, Bank of Greece statistics showed. The pace has yet to slacken, with mortgage loan expansion up 34.4 percent in February. High construction growth could be hard to sustain this year as companies find themselves under pressure to complete Olympic Games projects in the little time left, Maroulis said. «The construction sector could see growth of just 4-5 percent this year, about half of last year’s expansion, but still robust,» he predicted.