Global uncertainties hold back industrial production

Greek economic growth might still be going strong but the engine appears to be slowing down, the latest economic data from the National Statistics Service (NSS) indicate. Industrial production in August fell by 1.5 percent year-on-year while the drop in manufacturing production was even sharper, down 2.6 percent, the NSS said yesterday. In the January-August period, industrial and manufacturing production rose 1.5 percent and 0.3 percent respectively. The industrial production data are the latest economic indicators pointing to a brake on Greek growth. Last month, the NSS announced a significant dip in new car registration figures for August and a substantial decline in construction activity in terms of volume, trends which suggest that consumers could be holding back spending in the face of global uncertainties. The general climate of uncertainty appears to be affecting businesses as well, said Platon Monokroussos, economist at EFG Eurobank Ergasias. «The double dip in industrial and manufacturing production underscores problems faced by companies, chief among them global uncertainties,» he said. Production could have taken a hit from unexpected storms in August, he said. Unseasonably bad weather at the beginning of the year similarly derailed production, as workers could not get to work. The industrial and manufacturing production indices posted significant drops in January and February, recovering only in March. George Kofinakos, country treasurer at Citicorp, said the summer holidays could be another reason why companies cut back on production in August. While the Greek engine of growth appears to be losing its momentum, the overall picture is still better than the eurozone. Underscoring the region’s anemic expansion, Eurostat last month reported a 0.9 percent fall in July industrial production from the previous month and a 0.5 percent drop year-on-year. The eurozone is expected to grow by 0.2-0.5 percent this year, the European Commission said Thursday, revising its forecast downward for the fifth time. The European Central Bank said plunging stock markets and surging oil prices could hold back economic expansion this year, with a recovery expected next year. The Greek government is targeting 3.8 percent economic growth this year, rising to 4.1 percent next year without taking into account the fallout from a war in Iraq. A worse-case scenario puts growth at 3-3.1 percent. War could prompt the ECB to trim interest rates in order to stimulate economic growth, said Kofinakos. The central bank kept its key rates unchanged this week even as it pointed out higher downside risks to a recovery. Greek growth is expected to continue for the remainder of the year, albeit at a slower pace. «The purchasing managers’ index in Greece stayed above the critical 50 point mark in September, which is very positive,» said Monokroussos.