Drop in PMI and economic sentiment

Drop in PMI and economic sentiment

Manufacturing is likely to be in for another slump as the Purchasing Managers Index (PMI) for February showed a drop below the 50-point level for the first time in the last three months, Markit data showed on Tuesday. The same picture emerged from the economic sentiment index recorded by the monthly survey of the Foundation for Economic and Industrial Research (IOBE).

February witnessed a deterioration in terms of economic sentiment as a result of significantly reduced expectations in services and the decline in consumer confidence, IOBE said on Tuesday. Its index fell to 89 points from 91.6 points in January, and well below the 98.8 points of February 2015.

While there is a small improvement in the sentiment recorded in industry, retail commerce and construction, consumer confidence dropped to its lowest point since September 2013. This is attributed to a fresh deterioration in household expectations for their financial position in the next 12 months and for the country’s economic conditions in general.

IOBE commented that the delay to the completion of the bailout review, friction in the implementation of structural reforms and tax burdens have increased uncertainty and discouraged investment initiatives. Consumer confidence is also affected by the growing migration problem, as this can also affect expectations.

The PMI reading denotes a contraction in manufacturing orders, while Markit also recorded a shrinking in the output of Greek producers for a second consecutive month, which respondents associated to the prolonged economic and political uncertainty in Greece. The latest data further showed a greater decline in incoming new works, at the highest rate seen since last September.

New export orders also shrank, with respondents linking it to the farmers’ blockades, while employment in manufacturing posted a decline for the first time in three months, albeit a marginal one.

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