ECONOMY

Greek economic climate index in March bucks stagnant EU trend

Greece’s economic climate index bucked the rather stagnant trend in the rest of the European Union in March, rising by nearly one percentage point, the Foundation for Economic and Industrial Research (IOBE) said in a report yesterday. The improvement is mainly due to a surge in consumer confidence, as households saw a brighter picture for their economic situation in the next 12 months and inflationary pressures receding. There was a significant improvement of expectations in retailing and to a lesser extent in industry. By contrast, the expectations indices in construction and services recorded a slight decline. The seasonally adjusted Economic Climate Index (ECI), which takes 100 as a base for 2000, advanced to 99.6 points from 98.8 points in February. 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 for the fourth straight month, reaching 108.7 points from 106.0 points in February – (base 100 for 1990). The improvement is mainly due to higher expectations for production and forecasts for a small decline in inventories. Sales and exports were also seen as gathering strength in the next three to four months. Total demand is regarded as approaching normal levels, while the number of months of guaranteed production ahead rose from 6.0 in February to 6.2 and the rate of plant capacity utilization advanced by 0.5 percent to 75.8 percent. Construction Business expectations in the construction sector, based on estimates on the progress of scheduled projects and employment forecasts, declined to 118 points from 122.9 in February (base 100 for 1990), affected by moderated estimates of the work load ahead; 47 percent of firms consider work plans as normal, 18 above normal and 35 percent below normal. Construction activity was affected by bad weather, while 20 percent considered financing problems of equal weight. 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, surged to 122.3 points from 113.1 points in February (base 100 for 1993). There were forecasts of a marked improvement in orders to suppliers and a small rise in hirings. Prices are seen as remaining stable. Services The services sector expectations index, based on views regarding the business climate and demand forecasts, continued to slide from the previous month, as a relatively large percentage of firms (29 percent) viewed demand as weak, and the main adverse factor. The index, which improved throughout last year, fell to 96.2 points from 98.9 points in February (base 100 for 1998). A slight rise in demand and jobs is forecast for the next three to four months. Business expectations improved for the second straight month in the hotel and restaurant sub-sector and for the third month among travel agents, although it remained low. The EU average ECI rose to 96.8 points from 96.7 in February, but the European Commission said the figure does not take account of the likely repercussions of the terrorist attacks in Madrid as the main bulk of data was collected before it.