S&P Global: At the lowest level of more than a year, the manufacturing PMI

S&P Global’s PMI® survey data for May indicated a steady, albeit slower, improvement in operating conditions across the Greek manufacturing sector.

The overall rise was negatively affected by the sluggish growth of production and the unchanged, in general, inflows of new orders compared to April.

Customer demand from home and abroad was hampered by price spikes, which continued to rise significantly.

In an effort to pass on cost increases, sales prices have risen sharply, which was one of the fastest ever recorded.

Weaker demand conditions, rising prices and continued delays in deliveries have led to a reduction in both supply and finished goods stocks, encouraging companies to reduce their buying activity and use their stocks instead.

Meanwhile, production expectations have been boosted by hopes of price stabilization and investment in new products. S&P Global’s seasonally adjusted Purchasing Managers’ Index® (PMI®) closed at 53.8 points in May, down from 54.8 points in April.

The latest value of the main index indicated a steady improvement in the health of the Greek manufacturing sector, however overall growth weakened to the slowest recorded since March 2021.

The generally unchanged inflows of new orders during May contributed to the slowdown in growth. The corresponding seasonally adjusted index fell to its lowest level in more than a year.

In cases where an increase was reported, companies linked it to new orders from overseas customers. Nevertheless, growth slowed due to significant increases in sales prices that reduced customer demand.

New export orders remained in growth, although overseas sales increased only marginally. Some companies reported that uncertainty over the war in Ukraine also burdened export performance.

As a result, output growth slowed to the weakest level recorded in the current 14-month period of continuous growth. Greek manufacturers recorded a slight increase in production, as delays in material deliveries hampered production capacity.

At the same time, inflationary pressures remained significant, as selling prices rose more rapidly. The companies in the Greek manufacturing sector recorded one of the fastest charge increases in the history of the survey, due to the significant increases in input prices, which were largely passed on to customers.

The rate of increase in costs has been historically high, but it has fallen to the weakest level recorded since last August. Nevertheless, producers of goods continued to report rising costs for fuel, energy and materials, with metals and plastics being particularly prominent.

In line with significant cost increases and weak customer demand, companies reduced their input markets during May. Purchasing activity decreased for the first time since February 2021, although only marginally.

Many companies have opted to use their existing input stocks, as market stocks have shrunk to the second-fastest pace in more than a year.

Efforts to increase finished goods stocks were also hampered, as finished goods stocks fell at the second fastest pace since April 2020.

Meanwhile, Greek manufacturers further increased their number of employees in May. The higher production capacity led to the first contraction in the volume of unfinished business since April 2021, although the pace of job creation slowed to the slowest in more than a year.

Production expectations for next year improved in May and reached a three-month high. Unconfirmed data indicated that the optimism came from hopes for price stabilization, investment in new products and higher demand from customers.

Commenting on the results of the latest survey, Siân Jones, an economist at S&P Global, said: “Greek manufacturers have indicated a further improvement in operating conditions across the sector, however, the underlying data suggest less optimistic demand conditions.

Pricing pressures remained significant and continued to affect customer demand as customers hesitated in the face of soaring selling prices. The inflows of new orders remained broadly unchanged during the month, while there was only a marginal increase in export operations.

The producers of the goods themselves did not incur any additional costs, as input markets fell for the first time in more than a year, with companies choosing to deplete stocks.

Ongoing disruptions in the supply chain, the effects of the war in Ukraine and the spike in input costs are likely to continue to be the adverse conditions facing Greek manufacturers during the year. Although the companies were more optimistic about the outlook, our current forecasts are to increase industrial production by 1.6% in 2022. ”