Greek manufacturing: Activity at a two-year low in December

Manufacturing slowed further in December, slipping to its lowest level for 2022 in a month in which industry activity remained contracted.

In particular, S&P Global’s PMI for the manufacturing sector in the last month of 2022 fell to 47.2 points, from 48.4 points in November. This price is the lowest for the past year and is the lowest level since January 2021.

At the same time, December was the sixth consecutive month in which business activity in the manufacturing sector remained below 50 units, the threshold that separates expansion from contraction in an activity.

It is recalled that in January 2022 the PMI index had climbed to an almost historic record high of 59 points (59.3 points, the historical record in August 2021). Since then, the index has been down nine out of 12 months.

The importance of manufacturing for the Greek Economy

The decline in output during December was broadly stable and at a pace similar to that seen in November. Lower production was largely attributed to lower new order inflows and weaker customer demand due to significant cost increases.

The drop in production came from a sharper decline in customer demand. December data indicated the second-fastest decline in new sales in two years. The effects of higher energy costs and broader inflationary pressures reportedly weighed on customer spending and negatively impacted demand conditions. Accordingly, new exports fell sharply. The contraction in demand from overseas customers was among the fastest on record since January 2021.

Inflationary pressures across the entire Greek manufacturing sector eased significantly at the end of the year. Growth rates in input prices and output charges eased to the slowest since November 2020 and February 2021 respectively. Although input cost increases remain significant and above the survey average, companies have reportedly responded to the relative moderation in those increases by offering reduced prices to their customers in an effort to boost new orders.

Reduced demand for inputs also eased pressure on supplier capacity and supply chains. Supplier performance continued to decline, albeit to the least extent recorded in the current 35-month period of continuous deterioration.

Companies in the Greek manufacturing sector recorded a new increase in employment at the end of the fourth quarter. The number of workers rose for the first time since July, albeit only marginally. In the cases where job creation was mentioned, it was linked to the hiring of skilled workers.

Nevertheless, pressure on manufacturing capacity eased further in December. The backlog fell sharply and at the fastest rate recorded in just over two years.

At the same time, Greek manufacturers recorded stronger expectations regarding production in the coming year. Confidence rose to its highest level since May on hopes of stronger consumer demand and increased investment.