Greece’s Industrial Production Growth Slows to 1.1% in June as Manufacturing Momentum Fades

Greece’s industrial production grew by 1.1% year-on-year in June, down sharply from a revised 3.9% increase in May, according to data released by the Hellenic Statistical Authority (ELSTAT). The slowdown signals a cooling in the country’s manufacturing and energy sectors, which had shown stronger momentum earlier in the spring.

What the latest data shows

The June figure represents the weakest annual growth since February, when output contracted by 1.2%. The decline was broad-based across most sectors, with manufacturing output rising just 0.8% year-on-year, down from 4.2% in May. Mining and quarrying also slowed, while electricity production—a volatile component—dropped sharply after a surge the previous month.

On a monthly basis, industrial production fell 2.3% in June compared to May, reversing the 1.4% gain recorded in the prior month. The seasonally adjusted index stood at 98.4 points (base year 2015=100), down from 100.7 in May.

Why this matters for the Greek economy

Industrial production is a key gauge of economic health, influencing GDP growth and employment. The slowdown comes as Greece’s economy continues to recover from a decade-long debt crisis, with tourism and services driving much of the recent growth. A weaker industrial sector could weigh on second-quarter GDP figures, though analysts caution against overinterpreting a single month’s data.

The European Commission’s summer forecast projects Greek GDP growth of 2.2% in 2024, driven by investment and consumption. However, persistent inflation and high energy costs remain headwinds for manufacturers, who have struggled to pass on input price increases to consumers.

Regional and EU context

Greece’s slowdown mirrors a broader European trend. The eurozone’s industrial production contracted by 0.1% in June year-on-year, with Germany, the bloc’s largest economy, reporting a 1.7% decline. Greece’s 1.1% increase, while positive, lags behind Spain’s 3.4% growth but outperforms Italy’s 0.9% contraction.

Compared to the pre-pandemic average, Greek industrial output remains about 8% below 2019 levels, highlighting the sector’s slow recovery. The manufacturing purchasing managers’ index (PMI) for Greece fell to 49.2 in July, dipping below the 50 threshold that separates expansion from contraction, suggesting further softening ahead.

What to watch next

Economists will closely monitor the next few months’ data to determine whether June’s slowdown is a temporary blip or the start of a sustained trend. Key factors include energy price movements, the pace of EU recovery fund disbursements, and global demand for Greek exports, particularly in food processing and refined petroleum products.

The Bank of Greece has maintained its growth forecast of 2.3% for 2024, but a prolonged industrial slump could prompt a downward revision. For now, the data suggests that Greece’s industrial engine is losing steam, even as the broader economy remains resilient.

Conclusion

Greece’s industrial production growth halved in June to 1.1% year-on-year, down from 3.9% in May, reflecting weaker manufacturing and energy output. While the economy continues to expand, the slowdown underscores the fragility of the recovery and the challenges facing the industrial sector. Policymakers will need to address structural issues, such as high energy costs and supply chain constraints, to sustain growth in the months ahead.

FAQs

Q1: What does industrial production measure?
Industrial production tracks the output of manufacturing, mining, and utilities (electricity, gas, and water). It is a key indicator of economic activity and is used to assess the health of the industrial sector.

Q2: Why did Greece’s industrial production slow in June?
The slowdown was driven by a broad-based decline across sectors, with manufacturing growth easing to 0.8% and electricity output falling sharply. Monthly production also dropped 2.3% from May, indicating weaker momentum.

Q3: How does this affect Greece’s GDP?
Industrial production is a component of GDP. A sustained slowdown could weigh on overall growth, though services and tourism remain strong. Economists will watch upcoming data to see if the trend continues.