PMI looks up but sentiment dips

In a sign that the country might finally be on the road to economic recovery, data published on Thursday showed a rebound in manufacturing last month, although economic sentiment and consumer confidence dipped.

Manufacturing activity reached a three-and-a-half-year peak in July while the reduction in output and in new orders eased, according to the monthly survey carried out by Markit. The Purchasing Managers Index (PMI) climbed to a 43-month high of 47 points, from 45.4 points in June.

Although it remains below the 50-point mark that separates growth from contraction, the index has registered an increase in six out of the last seven months. Markit comments that this showed that the shrinking of Greek manufacturing is slowing down, creating genuine hopes for a sectoral rebound.

“The main PMI index continued its rising course toward the zero change point of 50 as the slower rate in the reduction of new orders has led manufacturers to reduce cuts in output, in jobs and in stocks compared with June,” stated Phil Smith, a Markit economist.

At the same time, however, the Economic Sentiment Index of the Foundation for Economic and Industrial Research (IOBE) declined from 93.5 points in June to 91.7 points last month, while consumer confidence dropped for the second month in succession.

IOBE commented that “political uncertainty appears to have affected business expectations to a small extent and consumer confidence to a somewhat greater level. Although the negotiations for the disbursement of the bailout tranche did not create grievances with the country’s creditors as in the past, the mobility scheme in the public sector has created friction with a portion of citizens.”

Economic sentiment is also affected by the expected tax burden households and companies will have to bear from September.