Economic climate index rising above EU levels, but not as fast

Greece’s economic climate improved further, but more slowly, in April, remaining at higher levels than in the rest of the non-enlarged European Union, the Foundation for Economic and Industrial Research (IOBE) said in a report yesterday. The improvement is due to a rise of the outlook in industry and a small improvement in consumer confidence. By contrast, business expectations in construction and the retail sector declined from March. The seasonally adjusted economic climate index (ECI), which takes 100 as a base for 2000, edged up to a new year-high of 99.7 points from 99.6 points in March. 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 Expectations in industry, measured in terms of the outlook for production and estimates regarding inventories and total demand, surged for the fourth consecutive month, reaching 110.3 points from 108.7 points in March – (base 100 for 1990). The improvement is mainly due to the prospects for liquidation of inventories of finished products, as there appeared to be no significant changes in the already positive estimates for orders and forecasts for production in the short term. Three-quarters of firms questioned said they believed demand to be at normal levels for the season, while a majority forecast stability in production, sales and exports in the next three to four months. Employment prospects in the coming months were considered to have improved, while more than 80 percent of firms forecast price stability in the short term. Construction Business expectations in the construction sector, based on estimates on the progress of scheduled projects and employment forecasts, continued to decline, falling to 116.8 from 118.0 points in March (base 100 for 1990), exclusively due to unfavorable projections regarding the volume of business ahead. However, the sub-index is seen as likely to rebound, as a higher percentage of firms forecast a rise in employment in the next three to four months (42 percent) and an improvement in the work volume (39 percent), while also more firms considered they faced no impediments to their activities. 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, declined to 118.3 points from 122.3 points in March (base 100 for 1993), as a result of moderated forecasts for sales levels. Most firms expect orders to suppliers and employment levels to remain stable in the short term. Services The services sector expectations index, based on views regarding the business climate and demand forecasts, rebounded strongly to 100.5 points from 96.2 in March; the percentage of firms in hotel and catering complaining of inadequate demand fell (55 percent) and employment is seen rising ahead of the Olympic Games. Travel agents, however, appeared less upbeat, although the percentage of firms complaining of inadequate demand dropped from 65 in March to 53 in April. The EU-15 average ECI improved for the fourth consecutive month to 97.2 points in April from 96.8 points in March, due to more favorable forecasts in industry, construction and retailing. Consumer confidence remained unchanged for the second month in a row.

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