ECONOMY

Economic climate index surges to recent-year high in January

In line with the rest of the European Union, the economic climate in Greece appeared much rosier in January, reaching its highest levels in recent years due to improved expectations in industry and the retail sector and to higher consumer confidence, the Foundation for Economic and Industrial Research (IOBE) said in a report released yesterday. The seasonally adjusted Economic Climate Index (ECI) advanced to 99.1 points from 98.6 in December. The climate in the services sector, which is not factored into the general index, also improved further, while the construction sector saw a deterioration. Economic climate indices are calculated on the basis of particular sub-indices of expectations in industry, construction, retail commerce and consumer confidence. Industry Expectations in industry, measured in terms of the outlook for production and estimates regarding inventories and total demand, advanced to 105.6 points in January from 104.6 in December – against last October’s 105.3-point high for 2003 (base 100 for 1990). The development is due to much more positive estimates regarding new orders, while forecasts regarding production, sales and exports in coming months remained more or less stable. Most businesses considered inventory levels normal for the season. Construction Business expectations in the construction industry, based on estimates on the progress of scheduled projects and employment forecasts, continued the slide of recent months, reaching 122.9 points from 125.3 in December (base 100 for 1990). The deterioration was entirely due to unfavorable forecasts regarding employment in the sector, which did not offset improved estimates of work ahead. However, the number of firms believing that they face problems due to insufficient demand decreased. The 2003 average for the construction sub-index was 133. Retail commerce Expectations in the retail sector, measured on the basis of forecasts for sales, inventory levels and business activity, rebounded to 116.4 points from 114.4 in December (base 100 for 1993). The majority of firms considered their current inventory levels to be normal for the season and expected employment levels to remain stable in coming months; 46 percent of firms expect rising sales, but the forecasts regarding order levels to suppliers were more modest. Services The services sector expectations index, based on views regarding the business climate and demand forecasts, continued its ascent since May, surging further to 103.3 points from 100.6 in December and 94.8 in November (base 100 for 1998). The improvement was mainly due to a more positive general outlook and prospects for demand. The percentage of firms reporting problems due to inadequate demand remained lower than the 2003 average. Demand expectations improved significantly in the information technology sector. The economic climate index in the eurozone rebounded in January after a drop in December, reaching 95.8 points (base 100 for 2000). The improvement was largest in Portugal (0.7 points), and on a par with Greece in the Netherlands and the UK.