Greek Economic Climate Sees Improvement in May with IOBE Index Rise

The Greek economic climate showed signs of improvement in May, as indicated by the Foundation for Economic and Industrial Research (IOBE) index, which rose to 111 units, up from 108.8 in April. This rise was driven by a mild improvement in industry order forecasts.

While the index remains in negative territory, the increase marks the smallest fall in more than a year. Greece continues to rank at the top among eurozone countries, with a Purchasing Managers' Index (PMI) of 54.9, though this represents a four-month low for the country.

Why this matters: The improvement in Greece's economic climate has broader implications for the European economy and global markets. A stronger Greek economy could lead to increased investor confidence and stability in the region, potentially boosting economic growth and job creation.

The broader eurozone context shows a mixed scenario. The final eurozone manufacturing PMI from Hamburg Commercial Bank (HCOB) grew to 47.3 in May, up from 45.7 in April. The Manufacturing PMI Output Index also jumped to a 14-month high of 49.3 in May.

Despite the improvements, Germany and France continued to show weakness, with PMI figures below 50, while Spain and the Netherlands saw accelerated expansions. Boudewijn Driedonks, a partner at McKinsey & Company, noted, 'In the Eurozone, manufacturing showed tentative signs of recovery. Export orders improved in Germany, and domestic demand appears to be picking up in France. However, weaknesses remain.'

In Greece, the manufacturing sector showed resilience despite higher cost pressures and supply chain disruptions. According to preliminary survey results from S&P Global, the PMI for the manufacturing sector dropped slightly to 54.9 in May from 55.2 in April but remained above the 50 mark, indicating growth.

Output growth remained strong in May, driven by sustained demand growth and a further expansion in new orders. However, input prices rose at a faster pace as higher raw material prices, including those for cocoa, fruit, and plastics, took their toll. Goods producers raised their selling prices at a slower rate.

The improvement in Greece's economic climate comes amid a backdrop of global economic developments, including first-quarter economic growth figures from the U.S., German inflation figures, and PMI survey figures from China. The EU's new budget rules, introduced in April, allow countries at least four years to cut back on red ink before facing sanctions.

The European Commission will release its official assessments of countries found to be in breach of the new rules in June, giving countries until around November to show how they plan to act. These developments provide a context for Greece's economic climate improvement, which is a positive sign amid broader economic challenges.

Greece's economic climate index rose to 111 units in May, driven by a mild improvement in industry order forecasts. Despite ongoing challenges, the country's manufacturing sector continues to show resilience, contributing to a positive economic outlook.

Key Takeaways

• Greece's economic climate index rises to 111 units in May, driven by improved industry order forecasts.
• Greece's PMI stands at 54.9, a four-month low but still ranking top among eurozone countries.
• The eurozone's manufacturing PMI grows to 47.3 in May, up from 45.7 in April.
• Greece's manufacturing sector shows resilience despite higher cost pressures and supply chain disruptions.
• The improvement in Greece's economic climate has positive implications for the European economy and global markets.