The May data pointed to a faster improvement in the health of the Greek manufacturing sector, as growth in production and new orders regained momentum.
The stronger demand came mainly from the domestic market, as new export orders continued to decline. Nevertheless, the modest increase in total new orders supported a rise in employment and led to a further increase in purchasing activity. However, severe disruptions in the supply chain, due to the war in the Middle East, hampered efforts to build up inventories of raw materials and finished goods. At the same time, growth in input purchases slowed due to significant inflationary pressures.
Cost pressures rose at the fastest pace in the last four years, mainly due to higher prices for oil and its derivatives. In response, businesses raised selling prices at the fastest rate recorded since October 2022.
S&P Global’s seasonally adjusted Purchasing Managers’ Index (PMI) for manufacturing in Greece stood at 53.3 points in May, up from 52.4 points in April, indicating a further improvement in operating conditions. The growth rate was higher than the survey’s long-term average and ranks among the strongest of the past twelve months.
Stronger growth in production and new orders underpinned May’s expansion. Following the loss of momentum recorded in April, the pace of growth accelerated thanks to stronger demand and successful efforts to attract new customers. However, the improvement in business sentiment stemmed mainly from the domestic market, as new export orders declined for the fourth consecutive month.
Supply chain pressures, due to the rerouting of transport routes caused by the war in the Middle East, further pushed up input costs in May, while higher energy prices were also recorded. The products most affected were oil and its derivatives. The rate of cost increase was particularly sharp, significantly higher than the survey’s historical average and the strongest since June 2022.
At the same time, the rise in selling prices accelerated for the third consecutive month and was the sharpest in roughly the past four years. Sustained demand allowed businesses to pass on part of the increased costs to their customers, although the rate of price increases remained lower than that of costs.
The lengthening of supply delivery times eased slightly compared to April, yet remained the second-longest recorded since October 2022.
At the same time, material shortages constrained input purchases by Greek manufacturing firms. Purchasing activity increased for the 19th consecutive month, but at the slowest pace in roughly the past year. As a result, firms struggled to replenish their inventories, and both raw material and finished goods inventories declined at a faster pace.
At the same time, the continued increase in new orders bolstered efforts to expand production capacity, leading to a significant rise in employment. The pace of job creation was the highest in the past four months. Nevertheless, the volume of backlogs returned to an upward trend. Following a slight decline in April, backlogs rose at the fastest pace since December 2021, as the supply of raw materials became more difficult.
Production expectations for the next 12 months strengthened again in May. According to the companies that participated in the survey, expanding the product range, investing in new facilities, and stepping up advertising efforts were key factors in boosting confidence. Although optimism remains below the levels recorded earlier in the year, it is still in line with the survey’s long-term trend.
Siân Jones, chief economist at S&P Global Market Intelligence, stated:
“The Greek manufacturing sector showed renewed momentum in May, as the rates of growth in production and new sales accelerated. As a result, job creation strengthened and business confidence improved.
However, the war in the Middle East continued to weigh on the sector, as severe disruptions in supply chains hampered growth in input purchases, while cost pressures intensified further. Although several companies planned to build up safety stocks, these efforts were largely hampered by difficulties in replenishing inventories depleted during the month.
Continued demand allowed companies to raise selling prices again in May, and at a faster pace. Meanwhile, according to the latest forecasts from S&P Global Market Intelligence, inflation, as measured by the Consumer Price Index (CPI), is expected to reach 4.2% in 2026.