ECONOMY

Global uncertainties put a damper on production

Greece’s industrial production appears to have lost momentum in July after a strong showing in the previous month, as sizable inventories and global uncertainties put a brake on production. According to figures released by the National Statistics Service (NSS) yesterday, the revised industrial production index slowed to 1.9 percent year-on-year in July, down from the 2.4-percent rise recorded in the previous month. Manufacturing production, a key indicator of the business investment environment, fell by 0.8 percent. The slower pace, however, is still higher than eurozone averages, EFG Eurobank Ergasias said in a flash note yesterday. «Greek industrial production growth remains in positive territory compared to negative rates in the eurozone,» it said. Seven-month figures, while underlining the continuing improvement, also pointed to the massive decline from the 2000 peak. Industrial production over the period January to July grew by 1.8 percent year-on-year, higher than the 1.4 percent recorded in the same period last year but significantly down from the 7.7-percent gain posted in 2000. Manufacturing production edged up by just 0.3 percent. The slow pace in industrial production came in sharp contrast to Greece’s strong economic growth and robust consumer spending. National output in the second quarter of the year rose by 4 percent, NSS data earlier this week showed. Retail sales were just as robust, growing by 9.7 percent in June. Alpha Bank economist Dimitrios Maroulis said businesses appeared to be negatively affected by global uncertainties. «Companies are worried and more easily influenced by international factors,» he said. He said production was also being held back because of high levels of inventories. «For example, we see a near 50-percent cut in the production of radio, television and telecommunications appliances in the first seven months of the year,» he pointed out. The poor equity market also put a damper on production plans, ERG Eurobank Ergasias said. In common with the bearish climate of international markets, the Greek stock market has shown more downs than ups. Low liquidity and poor investor sentiment have kept the benchmark index close to the 2,000-point level, down by more than 60 percent from its September 1999 peak. Slowing growth in the eurozone has also contributed to slow production. The European Commission last week trimmed its third-quarter growth forecast for the region and said prospects in the final quarter are not likely to improve. Despite the slowdown, Greek industrial production is expected to pick up in the coming months on the back of favorable base effects. Maroulis said production could rise to 1.5 percent by the end of the year.