Bad news for growth, CPI

The latest economic data on industrial production and the prices of industrial imports, issued yesterday, confirm fears of a decline in financial activity and a rise in inflationary pressures. National Statistics Service (NSS) data showed that the industrial imports’ price index posted a 12.6 percent rise in June, compared with the previous month, owing to the soaring prices of raw materials, oil and food. In particular, the prices of mining products (marble, chemicals for the fertilizing industry etc) nearly trebled, registering growth of 181.3 percent. Crude oil and natural gas saw increases of 50.5 percent, while refined oil products carried price rises of 38.9 percent. Food industry imports (such as meat, coffee, alcoholic beverages, milk, children’s food, butter, corn oil etc) posted more moderate increases of 8.4 percent. The steep rise of imported inflation is multiplying pressure on the Greek economy, which was already susceptible to inflation given the competition distortions on the local market. The consumer price index (CPI) remained at 4.9 percent in July. Separately, Greek industrial production declined by 3.1 percent in June, increasing concerns about the country’s growth prospects. Over the first six months of 2008, the decline has come in at an annual rate of 2.4 percent. Production declined, particularly in manufacturing, by 4.6 percent in June, due to the drop in the output of apparel as well as oil and coal products. By contrast, the index of electricity-natural gas-water production posted 2.2 percent growth, thanks to an increase in the production and distribution of natural gas. The NSS data justified the decline in business expectations and the general pessimism of industrialists regarding the short-term prospects of the sector. On Monday, the NSS will announce the gross domestic product growth data for the second quarter of the year, which is expected to show the rate dropping to 3.2-3.3 percent from 3.6 percent in Q1. In this negative climate, the only good news comes from exports, which, according to the NSS, continued to increase in June. The export figure reached 4.8 billion euros, from 4.71 billion euros in June 2007.