ECONOMY

After success of Games, economic climate improves

Greece’s Economic Climate Index (ECI) showed a significant improvement in October, almost exclusively due to the absence of the very negative expectations recorded in the construction sector in September after the end of the Olympic Games, the Foundation for Economic and Industrial Research (IOBE) said in its monthly review yesterday. The seasonally adjusted ECI rose to 94.9 points in October from 93.7 points in September. The index had been on a steep decline since June, when it stood at 106.8 points – way above average eurozone and EU-25 levels. Economic climate indices are calculated on the basis of particular subindices of expectations in industry, construction, retail commerce, services and consumer confidence. Expectations in industry, measured in terms of the outlook for production and estimates of inventories and total demand, edged slightly down to 97.5 from 97.9 in September – (base 100 for 1990), affected by more moderate forecasts for orders from home and abroad. However, the number of months of secured production ahead rose from 4.5 to 4.8. The rate of plant capacity utilization fell to 74.3 percent from 75.6 percent in September. Eighty percent of firms see employment and prices remaining stable. One third of respondents viewed inadequate demand as the main factor impeding an expansion in production, up from 27 percent in July. Business expectations in the construction sector – as based on the progress of scheduled projects and employment forecasts, advanced to 75.4 points in October from a year-low of 66.9 in September (base 100 for 1990). Still, a majority of firms (54 percent) continue to see a decline in employment and 43 percent consider the amount of work ahead as less than normal. Employment forecasts in private construction improved considerably from gloomy in September to stable in October, but remained pessimistic in the public works segment. Expectations in the retail sector, measured on the basis of forecasts for sales, inventory levels and business activity, declined from 115.1 points in September to 110.7 in October (base 100 for 1993), on the back of a gloomier sales outlook. However, an upturn is expected in the months ahead, as in employment, though weaker than in the previous month. The services sector expectations index edged slightly down to 86.5 from 88.5 in the previous month (base 100 for 1998). Demand and prices are seen as stable and employment may recede slightly in the short term. Hotels, restaurants and travel agencies registered have a gloomier view of business in the months ahead than at the same time last year, but the segment of other services (including advertising and telecommunications) shows a slight improvement from September, with 60 percent of firms stating they are conducting business without impediments. The EU-25 ECI average improved from 103.9 in September to 104.5 in October, and the eurozone average from 101.0 to 101.3.