This post is based on figures as they were until Monday the 7th of January. Due to October data being revised after that and November data being released shortly afterwards, I need to update the post since conclusions have to be slightly altered...
Since I started this blog two years ago I have been itching for an opportunity to write something positive about my native Greece. The first head-fake occurred more than a year ago when I first looked at aggregate exports data. Though, as it turned out the rise in Greek exports was powered along by the rise in petroleum exports, meaning that celebrations had to be postponed.
Since I started this blog two years ago I have been itching for an opportunity to write something positive about my native Greece. The first head-fake occurred more than a year ago when I first looked at aggregate exports data. Though, as it turned out the rise in Greek exports was powered along by the rise in petroleum exports, meaning that celebrations had to be postponed.
Lately, industrial production has been showing
some signs of life.
source: Eurostat |
For the first time since 2007 (bar one month in
2008) industrial production rose, first in August and then again in October.
The seasonally adjusted Industrial Production
Index seems to have stabilized and the 5 month moving average of changes (over
the same period of the previous year) is moving towards less negative
territory.
source: Eurostat, own calculations |
All these are positive signs but aggregate
indicators are known to conceal nasty truths under shiny wrappers, so I would
like to delve a bit deeper.
First, a tiny bit of background regarding the
Greek manufacturing sector, which could go some way into explaining its current
ill state.
The Greek manufacturing sector is the least
export-oriented among those of all OECD countries. Actually, the US one is, but
manufacturing sectors of larger countries tend to be less export-oriented in
general, hence the wording of the previous sentence.
source: OECD, own calculations |
Of
course, the said feature of the Greek
manufacturing sector was not coincidental and not all detrimental for
Greek manufacturers
during the boom years of the ‘00s (again judging by aggregate data that
may mask significant divergences among manufacturers of different size
and belonging to different sectors). Since, Greek manufacturers were
better
placed than their competitors (or maybe due to market regulation and a multitude of other reasons) they
enjoyed
hearty pre-tax margins, of course at the expense of Greek consumers.
source: Eurostat |
Their pre-tax margins were the third highest
among EU27 countries for which data were available.
Of course, when the tables turned and domestic
demand collapsed after the sudden stop in external financing that the country
experienced, what was an advantage turned out to be a severe hindrance to their
viability.
The extremely low technology content of Greek
manufacturing is not helping in that respect as well, since the only producers
it is effectively competing with are emerging markets at the earliest stages of
industrial development.
source: Eurostat |
As of 2011, the three more important sectors
of Greek manufacturing were Food Products etc., Basic Metals and Coke and
Refined Petroleum Products.
I would now like to take a look at how each
sector performed these past three months. Here’s the chart.
source: Eurostat |
As you can see the bulk of growth comes from the
Coke and Refined Petroleum segment that grew strongly on both August and
October. On August, Food Products etc. posted a marginally positive
contribution along with a few other sectors which lifted the overall growth
figure. The same cannot be said for October on which only Coke and Refined
Petroleum Products (and Other Manufacturing) posted a positive contribution.
If one looks at the aggregate index, it might
appear as a bottom has been forming this past year. When delving deeper though,
things do not appear to be that uncomplicated.
In an effort to gauge the state the three main
sectors mentioned above are, I calculated and plotted the 5-month moving
averages to smooth out monthly fluctuations.
source: Eurostat, own calculations |
Only Coke and Refined Petroleum Products is in
positive territory, while the rest are still in the red, albeit moving on less
negative territory lately. If in the next few months they break out of their respective
downtrends, the overall picture of the sector will improve significantly (as far as the picture indexes paint is concerned).
To wrap this up, in my humble opinion the current
positive signs are at best weak, since most sectors are still wobbly. Strong growth by the Coke and Petroleum Products segment does skew positively the overall picture of the sector. If things stay that way though, with periodic upward spurts by a couple of segments at a time, that doesn't make for a meaningful improvement of the situation in the sector. We have to say though that
when bottoms are formed things do look wobbly, uncertain and fragile. What's more, usually the human brain extrapolates the present situation into the future and when one has stayed for that long in depression as we Greeks have it is easy to be permanently negative. That said, one has to be careful (myself included) not to fall into that loop. Only time
will tell though how far away from the bottom (as far as the manufacturing sector is concerned) we currently are…
I got many information. Thank you!
ReplyDeleteCoould I qoute from yours for making the soultion of Greek's economy?