Greek PMI Shows Manufacturing Slump Worsened in August

ATHENS, Sept 1 (Reuters) - A slump in Greece's manufacturing activity worsened in August as output and new orders contracted more sharply and job cuts accelerated, a purchasing managers' survey showed on Wednesday.


There was, however, one encouraging sign in that export orders rose slightly -- for the first time in nearly a year -- although the growth rate was marginal.

The Markit Manufacturing Purchasing Managers' Index (PMI) for Greece fell to 43.0 points in August from 45.3 in July, staying firmly below the 50 mark that separates growth from contraction.

Austerity measures and depressed confidence as Athens tackles the country's massive debt burden have kept Greece in recession for a second year. Gross domestic product is seen contracting by as much as 4 percent in 2010, according to analysts and the central bank, after shrinking 2 percent last year.

Weak economic conditions were hurting demand, making clients reluctant to commit to new projects, survey participants said.

With production and new orders in decline for 11 and 12 straight months respectively, excess capacity at manufacturing plants led to reductions in work backlogs, stocks of finished goods and employment.
The index for work backlogs plunged to 34.5 from 45.1 in July.

"Following the relative improvement during July, the PMI slipped back in Aug as new orders and output both deteriorated at accelerated rates," said Markit economist Gemma Wallace.
"Given the stringent fiscal tightening that will remain in place for some time to come, domestic demand is set to remain weak going forward. Exports will be required to play a key role in recovery and the latest survey offered a glimmer of hope -- foreign sales rose slightly for the first time in 11 months," Wallace said.
Companies continued to shed jobs in August for the 28th consecutive month and at the fastest rate in nearly a year and a half, the PMI survey showed.
Manufacturers' costs rose more sharply in August as a result of increased raw material prices, higher taxes and rising transport costs. But weak demand and intense competition meant manufacturers were unable to pass on those higher costs to customers and often had to offer promotional discounts.