Capital Controls Destroy Greek Small Businesses; Bank Shares Plunge Again; Record Contraction

Record Manufacturing Contraction
Greece may as well have gone to hell in a handbasket. Carnage is everywhere one looks, but let’s start with the Markit Greece PMI report that shows record manufacturing contraction.
July saw factory production in Greece contract sharply amid an unprecedented drop in new orders and difficulties in purchasing raw materials. The headline seasonally adjusted Markit Greece Manufacturing Purchasing Managers’ Index registered 30.2, well below the neutral 50.0 mark and its lowest ever reading.
Record contractions were registered for almost all variables monitored by the survey, including output, new orders, employment and stocks. There was also a record lengthening in suppliers’ delivery times.
July’s sharp decrease in the level of new business at manufacturers surpassed the previous record set in February 2012. Panel members commented on the impact of capital controls on demand, and also cited a generally uncertain operating environment which further weighed on sales. A sharp and accelerated decrease in new export orders (also a series record) added to the overall reduction in new work.
July’s survey signalled the steepest drop in factory employment ever recorded during the 16-plus years of data collection. The decrease was the fourth in successive months, following marginal job losses throughout the second quarter of the year.
A lack of availability of supplies meanwhile contributed to a rise in average purchase prices, with the rate of cost inflation accelerating from the previous month to the second-fastest since September 2012.
In contrast, prices charged by manufacturers for goods decreased to the greatest extent for over two years, the rate of decline notably more marked than the moderate pace of deflation recorded during the month before.

This post was published at Global Economic Analysis on August 04, 2015.