IHS Markit: The upward trend of the manufacturing sector in Greece remains important

Further significant improvement in the health of the Greek manufacturing sector was indicated by the IHS Markit PMI® survey data for November, as the overall growth rate was broadly proportional to the rate observed in October.

The rate of increase in production was similar to the rate observed in the previous period of the survey, thanks to the support received from the sharp rise in new orders. Meanwhile, the rate of increase in costs has accelerated due to severe shortages of raw materials and the extension of delivery time. As a result, productive pressures intensified and unfinished business increased at the fastest pace in the history of the survey (since November 2002), despite employment growing at the fastest pace in five months.

The IHS Markit Main Purchasing Managers’ Index® (PMI®) is a composite indicator of the performance of the manufacturing economy. It comes from indicators on new orders, production, employment, delivery time and supply stocks. Any value above the zero change point of 50.0 points indicates an overall improvement in sector conditions.

The main PMI closed at 58.8 points in November, marginally lower than the 58.9 points in October, indicating a significant improvement in operating conditions in the Greek manufacturing sector. The overall growth rate was at historically high levels.

Production throughout the Greek manufacturing sector increased sharply in November, with the growth rate corresponding to that observed in October. In cases where an increase in production was reported, companies linked it to higher customer demand. However, shortages of raw materials slowed down the growth potential, as the pressures exerted on the productive potential intensified. The growth rate was the second slowest in seven months.

At the same time, new total sales increased significantly in November. Despite strong demand conditions, the growth rate slowed to a four-month low as commodity producers reported increases in sales prices and shortages of raw materials resulted in cancellations on the part of customers. Accordingly, the growth rate of new export orders decreased.

Meanwhile, supply chain turmoil has worsened due to raw material shortages and transport delays, as delivery times have been significantly extended in November. Shortages pushed input prices higher as cost growth accelerated to a record high in research history. Important factors that contributed to this increase were the higher prices of energy, fuel, metals, plastics and packaging materials.

Companies sought to pass on higher input prices to customers as output charges increased significantly. The growth rate was the second highest in the history of the survey, although there were some concerns about order cancellation due to higher selling prices.

Difficulties in the supply of raw materials and the sharp increase in new orders led the volume of unfinished business to a record high in the history of research, in the middle of the fourth quarter. The low availability of inputs negatively affected production capacity, although the increase in employment levels was the strongest in five months.

Although the cost burden increased again, manufacturing companies increased their input markets at the sharpest pace since May 2000. Stocks, however, shrank further. The companies reported difficulties in replenishing stocks of supplies and finished products, due to the turmoil in the supply chain.

Finally, in October, the expectations regarding the prospects for production within the next year were strengthened. Strong levels of business confidence were attributed to hopes for further growth in customer demand and greater stability in supplier performance.

“Greek manufacturers continued to indicate a significant improvement in operating conditions in November, as demand increased again significantly from customers,” said Siân Jones, an economist at IHS Markit, commenting on the results of the latest survey. “Production growth has been strong, but continued significant supply chain turmoil has slowed growth. As a result, productivity pressures have intensified as the volume of unfinished business has grown rapidly over 19 years.

Material shortages have led to one of the biggest extensions of supplies since the outbreak of the pandemic. Along with rising energy and fuel prices, rising costs have hit a record high in research history. “Although the main growth rate is rising, some companies have begun to draw attention to passing on the heaviest cost burden to customers, as there are reports of customers who oppose this tactic.”