National Bank of Greece Sees Upturn in July-Aug Economic Activity

Economic activity in July and August recorded an upturn with a positive impact of tourism, according to tentative data released by the National Bank of Greece (NBG).

More specifically, the number of international arrivals at Athens International Airport in the aftermath of the Covid-19 restrictions slowed down the contraction to -66.2 percent in August from -76.1 percent in July and -96.7 percent in the 2nd quarter of 2020. The sector’s improved performance in August is expected to support demand and business activity.

In terms of growth, NBG’s monthly GDP index increased by 6.0 percent in July and by 4.7 percent in August on a monthly basis, suggesting a likely Q3 GDP growth of around 8.0 percent on a quarterly seasonal basis against a quarterly contraction of 14.0 percent in Q2.

The estimate corresponds to a contraction of GDP by 8.4 percent in Q3 compared to the same period in 2019, and an average annual 8.0 percent decline in the first nine months of 2020, consistent with NBG’s baseline scenario for an annual recession of 7.5 percent for 2020.

NBG analysts go on to note that GDP increased at a stronger monthly pace of 5.5 percent in July-August, but the flattening of high frequency indicators point to a slower recovery in September.

A closer look at individual indicators found business turnover contracted by 17.5 percent y-o-y in July 2020 compared to -25.0 percent y-o-y in Q2, and up by 6.6 percent on a monthly basis.

The delayed opening of the tourism season weighed down on several sectors, mainly on manufacturing turnover. Mobility trends and international arrivals showed a further improvement in August.

Economic sentiment, meanwhile, stabilized to 90.7 in August, but is still 9 percent below its six-year average.

Manufacturing PMI picked up slightly to 49.4 in August – same as in June 2020 – with domestic and export orders losing steam.