IOBE: Dramatic deterioration of the economic climate for fifth consecutive month

IOBE: Dramatic deterioration of the economic climate for fifth consecutive month

Athens, August 4, 2015/ Independent Balkan News Agency

By Spiros Sideris

The economic sentiment indicator in Greece records a significant deterioration, for the fifth consecutive month, standing at 81.3 (from 90.7 in June), according to an economic survey of the Foundation for Economic and Industrial Research (IOBE).

According to IOBE, this is the lowest performance of the index since October 2012. The negative development is the result of the marked deterioration of business expectations in all areas, and the new, significant decline in consumer confidence.

As had been predicted in the previous report of the Foundation, this development is the expected result of adverse and extreme economic developments that followed the referendum of July, the imposition of capital controls in the banking system and the extended political uncertainty. The actual effect of capital controls – that is a fact unprecedented for modern Greek economy – cannot be evaluated today, as it is a phenomenon that is still evolving. It is certain, however, that it adds to an already shrinking economic activity and leads to a deepening of the recession and the crisis in general.

According to IOBE, it goes without saying that reversing the negative course of expectations, as a first step in moving towards development, requires active stabilizer moves at all levels of the economy and politics.


– In industry, forecasts for production in the coming months deteriorate significantly, with the balance in the estimates for stocks remaining almost unchanged and estimates for orders and demand limited.

– In services, the negative assessments of the current, but also the forecasts for short-term demand increase, while estimates for the current business situation also worsen significantly.

– In retail trade, estimates of current sales are going down, as well as the forecasts for short-term developments in them, while the ratio of the estimates for stocks is slightly easing.

– In construction is recorded a deterioration in the forecast for scheduled operations of businesses, but also more difficult predictions in terms of employment.

– On consumer confidence, the forecasts for the financial situation of the household, those on the economic situation of the country in the coming 12 months and unemployment trends, as well as the intention to save money, all deteriorate.

Small improvement in the economic climate in the EU and the Eurozone

The economic climate improved slightly in July compared to June, marginally in the Eurozone and more in the EU, with the relevant indicator standing 0.5 points higher in the first case and 1.1 in the second (at 104 and 106,6 points respectively), above the levels of long-term mean in both cases.

Specifically in the Eurozone, the marginal improvement of the indicator is the result of a positive change in business expectations in industry (+0.5), Services (+1) and Retail trade (+2.3). Expectations basically remained unchanged in Construction (+0.3) and deteriorated in terms of consumer confidence (-1.5). At country level, the overall expectations slightly improved in Germany (+1), France (+0.8) and less in the Netherlands (+0.4), while remained unchanged in Spain (+0.3) and Italy (-0.3).

In the EU, the economic climate is changing positively and more strongly than the Eurozone, a development emanating from the significant rise in expectations in the United Kingdom (3.5), since in Poland expectations weaken (-0.7). At the sectoral level, the climate generally follow the trend of the Eurozone, with the expectations on services, however, recording a stronger rise, while subsiding in construction. As in the Eurozone, consumer expectations weaken.