Friday, 9 September 2016

A positive sign from Greece's housing market.

Today, after quite a long time, I took a peek at the rentals component of the Harmonised Index of Consumer Prices. And I was in for a surprise. The index has stopped falling, on a monthly basis, for the past 7 months.

source: Eurostat, own calculations

The question that instantly springs to mind is "are we closing in on the bottom here?". Well, it certainly seems like it, not only from a rentals perspective but also from an apartments' prices perspective.

Actually, the rentals' trajectory lately is quite similar to that of apartment prices. 

source: Eurostat
source: Bank of Greece
Let's hope that this time round the market will be allowed to follow its path without any political disruptions that could delay further the, so much needed and awaited, stabilisation (and hopefully recovery).

Wednesday, 31 August 2016

Are Greek retail sales greying at an alarming rate ?

If one bothers to look closely at DG ECFIN's business surveys he/she might be able to make out an interesting divergence that's been building since the start of 2016. Namely, the divergence between ELSTAT's retail trade volume index and DG ECFIN's retail trade business activity development series.

source: ELSTAT, DG ECFIN, own calculations

The only explanation my linear thinking mind can come up with is that an increasing part of Greece's retail sales is going underground.

One fact though that is mightily puzzling (and not really consistent with the chart above) is that government receipts from value added taxes are doing rather well at the same time.

source: Hellenic Ministry of Finance

Now if you're wondering how is it possible for value added taxes receipts to do well when official retail sales are plummeting, I'm afraid I don't have any explanation ready to offer.

P.S. I wouldn't pay much attention to the parabolic rise of receipts in June (and to a lesser degree, May) since this is compared to June 2015, which was bang in the middle of the Greek government's debacle with our creditors and people were kind of reticent to pay their taxes at this particular moment.

Monday, 29 August 2016

Greek GDP - Q2 2016 update

╬čfficial figures for Greece's Q2 2016 GDP were announced today. The Greek economy contracted by 0,95% compared to Q2 2015. Here's the official announcement

source: ELSTAT

The only GDP component that grew when compared with Q2 2015 was Gross Capital Formation.

source: ELSTAT

If we try to analyze GDP's components, the ones preventing a larger GDP decrease were Gross Capital Formation and Imports (which continued to slide).

source: ELSTAT, own calculations

One has to remark on the household final consumption's accelerating slide and on the continued slump in exports, a slump that started since the imposition of capital controls.

To wrap this up, Greek GDP continues its stay in no man's land with the tax-raising policy picked by the government not bearing much fruit and seemingly pushing an increasing part of the economy in the grey area.

Wednesday, 15 June 2016

Greek deflation: just due to import prices falling?

When one looks at Greece’s inflation dynamics, he/she is bound to draw the conclusion that the deflation spell that the country is experiencing is due to the 24% drop in final consumption expenditure. That’s textbook stuff right? Well, textbook stuff rarely apply to Greece’s monstrously distorted economy.

One look at import prices though may prompt people to think differently and start examining other eventualities.

source: ELSTAT
As you can see a couple of months before Greece’s consumer prices index entered deflation territory, import prices index had done so. Moreover, the renewed dive in CPI in late 2014 was again preceded by a dive in import prices.

Someone could think, “ok but we all know that prices display at least some degree of downward rigidity”. In Greece some means prices peaking about four years later than final consumption expenditure did. Final consumption peaked in 2008 while CPI peaked in 2012.

source: Eurostat, own calculations

In Ireland on the other hand, consumer prices peaked on the same year that final consumption did. They did of course start rising again before final consumption rebounded but most likely this was due to indirect taxes being hiked in 2011. 

source: Eurostat, own calculations

One further objection that could be raised is that the hiking of taxes (direct and indirect) that took (and still takes) place these past (not so) few years distorted inflation’s trajectory in Greece’s case as well. 

Luckily, Eurostat publishes a HICP time series under the assumption of constant tax rates. If one bothers to look at it she/he will find out that this indicator peaked in 2012 as well. The difference between the two is that under constant tax rates, consumer prices would have peaked 6-7 months earlier. 

The period until end-2012 bore the brunt of the decrease in final consumption. However, consumer prices not only didn't fall as a response to plummeting demand but continued to rise.

source: Eurostat, own calculations

To wrap this up, the evidence presented above show without any doubt that calling products and services markets in Greece simply distorted is a euphemism. It would not be excessive for one to claim that they barely function at all. If prices had fallen along with demand (at least up to a degree), consumers’ purchasing power would have been less hard hit and the depression would feel (a bit) less severe.