Business expectations slide in January as retailing weakens

Greece’s economic climate showed a slight deterioration in February but remained more upbeat than the eurozone as a whole, which remained stable at January levels, the Foundation for Economic and Industrial Research (IOBE) said in a report released yesterday. The seasonally adjusted Economic Climate Index (ECI), which takes 100 as a base for 2000, slid to 98.8 points from 99.1 in January. The eurozone average was 96.0, with Denmark reporting the largest improvement (0.6 points), followed by Ireland, Germany and Spain. France and Italy also reported a slide. Consumer confidence improved by one point from January, along with a marginal rise in expectations regarding jobs, households’ financial situation and savings. Economic climate indices are calculated on the basis of particular sub-indices of expectations in industry, construction, retail commerce and consumer confidence. The services sector is not factored into the general index. Industry In Greece, expectations in industry, measured in terms of the outlook for production and estimates regarding inventories and total demand, advanced further for the third straight month to 106.0 points from 105.6 in January – (base 100 for 1990). The improvement is due to more optimistic forecasts regarding production, sales and exports; firms said orders approached «normal» levels for the season. The number of months of guaranteed production ahead remained high at six, but the rate of plant capacity utilization fell. Forecasts regarding prices in the months ahead also weakened slightly, with 76 percent of firms predicting stability, 18 percent a rise and 6 percent a decline. Construction Business expectations in the construction sector, based on estimates on the progress of scheduled projects and employment forecasts, remained unchanged in February from the January level of 122.9 points (base 100 for 1990). Forecasts regarding employment improved, but were offset by more modest estimates for projects under construction; work schedules are considered below normal for the season by 24 percent of firms, a lower rate than a year ago. The number of months of guaranteed work ahead was up marginally, while most firms do not anticipate rising prices. The 2003 average for the construction sub-index was 133 points. Expectations in the retail sector, measured on the basis of forecasts for sales, inventory levels and business activity, receded to 113.1 points from 116.4 in January (base 100 for 1993), mainly due to softer forecasts for sales; 71 percent of firms do not see any changes in the level of orders to suppliers in the medium term. The services sector expectations index, based on views regarding the business climate and demand forecasts, reversed its gradual improvement throughout last year, falling to 98.9 points from 103.3 in January (base 100 for 1998). The slide is attributed to firms’ less favorable estimates regarding their financial indicators in the current period and more modest forecasts for the future. Most firms regard demand as stagnant over the last three months, and a marginally higher number expect a rise in the next quarter. Employment levels remained stable, according to 77 percent of firms, and the number expecting no change in the near future remained high. Business expectations improved in the hotel and restaurant sub-sector, but fell among travel agents for the second straight month.

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