ECONOMY

Economic Climate Index moves upward in May

Greece’s Economic Climate Index improved in line with the rest of the eurozone in May, reversing a declining trend since January and reaching its highest point so far this year, the Foundation for Economic and Industrial Research (IOBE) reported yesterday. «This development is mainly due to improved expectations in the sector of industry. Also positive was the development of consumer confidence, with a small improvement in the relevant index,» IOBE said in its monthly report. Greece’s Economic Climate Index, calculated on the basis of particular expectation indices in industry, construction, retail trade and services, rose 0.4 points to 102.1, while the eurozone average improved by the same measure to reach 99.8 points. The EU15 average was 100.1. The business expectations index for industry approached 109 points in May from 105.3 in April, as a result of improved views regarding the present situation of businesses and optimistic forecasts for the immediate future. This is the highest point of the index since March 2001. Most industrial firms said they believed that both stocks (84 percent) and total demand (72 percent) were at normal levels. Expectations are also optimistic regarding levels of production and sales and exports over the next three to four months, as 42 percent, 48 percent and 32 percent of businesses respectively said they expected an improvement. Inflationary expectations fell drastically, with 84 percent of respondents expecting price stability in the short term. Also, 21 percent expected employment to rise in the short term, from 15 percent in April. In the construction sector, expectations remained at the levels of the two previous months (129 points) due to two countervailing trends, improved expectations for activity but more cautious forecasts for employment. Another welcome development was an increase in the percentage of firms which believe that their activity was not being hampered; 31 percent of respondents believed their main obstacles were institutional and bureaucratic arrangements, 20 percent blamed weather conditions and 16 percent inadequate labor supply. Expectations improved markedly among retailers in May, with the relevant index rising to 107.2 points from 105.5 in April, thanks to an improved medium-term outlook. Most businesses expect orders to suppliers to remain stable in the next three to four months, while 18 percent forecast an increase. The percentage of firms expecting to hire new staff rose from 10 percent in April to 29 percent. The climate in the services sector seemed to recover, rising to 81.4 points from 78.2 in April, but remained at significantly lower levels than a year earlier (113.5). Among hoteliers, 56 percent considered the climate to be unfavorable – compared to 33 percent in April – almost in line with travel agents (55 percent) who, nevertheless, said they expected business to improve.