Greece’s manufacturing industry shrank at a record pace last month as demand collapsed amid capital controls introduced in an attempt to contain the nation’s crisis.
Markit Economics said its factory Purchasing Managers’ Index fell to 30.2 from 46.9 in June. A reading below 50 indicates contraction. A gauge of new orders plunged to 17.9 from 43.2, also a record low.
Markit said survey respondents blamed capital controls and a “generally uncertain operating environment” for the loss of business. The plunge in the index reflects heightened concerns last month about Greece’s future in the euro area after a temporary breakdown in negotiations on a bailout deal.
“Although manufacturing represents only a small proportion of Greece’s total productive output, the sheer magnitude of the downturn sends a worrying signal for the health of the economy as a whole,” said Phil Smith, an economist at Markit in London. “Bank closures and capital restrictions badly hampered normal business activity.”
The weak factory reading highlights the challenge Prime Minister Alexis Tsipras faces in reviving the shattered Greek economy, which has shrunk by about a quarter in the past six years. The country has already fallen back into a recession and the economy is forecast to contract this year.
In the euro area, Markit’s manufacturing index slipped to 52.4 in July from 52.5 in June. That’s better than the initially reported reading of 52.2. The measure for Germany, Europe’s largest economy, was at 51.8, higher than the estimate of 51.5.