Greece: Manufacturing sector weakens slightly in June, but business conditions remain strong overall
July 2, 2018
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) declined from 54.2 points in May to 53.5 points in June. Nonetheless, the index remained comfortably above the critical 50-point threshold that signals expansion in the manufacturing sector, where it has been for just over one year.
Despite the downtick in the headline figure, the components of the index showed healthy growth in the manufacturing sector. New orders growth picked up in June on the back of both stronger domestic and foreign demand. In addition, hiring activity gained steam in June, and stocks of inventory decreased to fulfill new orders. Output growth was largely unchanged from May to June. In terms of prices, input price inflation accelerated at the fastest rate since January 2017 due to higher raw material costs, particularly for steel. Output prices rose in response for the sixth successive month.
June marked the eleventh consecutive month in which new work orders expanded and the thirteen month of consecutive rises in output, pointing to the overall strength of the manufacturing sector in comparison with historical averages. Furthermore, business confidence remained elevated at a level among the highest in the survey’s history (which began in July 2012).
Regarding price pressures, Alex Gill, Economist at IHS Markit, commented:
“A potential headwind for Greek firms is rising cost burdens – input price inflation hit a 17-month high in June amid higher costs for raw materials in global markets. With pricing power remaining muted, manufacturers are facing further pressure on profit margins.”