Greek manufacturing shrank at its fastest rate in at least thirteen years in February as production and new orders declined at record rates, driving the sector deeper into recession and forcing firms to shed more jobs, a survey showed on Thursday.
Greece will apply additional fiscal austerity to shore up its finances as part of a new rescue package it agreed with its euro zone partners and the IMF to avert a chaotic default and emerge from a severe debt crisis.
The Markit Manufacturing Purchasing Managers' Index (PMI) for Greece fell to a survey low of 37.7 points in February from 41.0 in January, staying below the 50 mark that divides growth in activity from contraction for each of the past 30 months.
Production and new order volumes fell at the sharpest pace in the near 13 year history of the survey as austerity sapped demand. New export orders fell for a sixth straight month and at the steepest rate since May 2010.
Greece's 215 billion euro economy shrank by an estimated 6.8 percent in 2011, its fourth straight year of recession. It is seen contracting this year as well.
The latest survey provided another stark reminder of the difficulties the Greek economy is facing. Problems of accessing credit, combined with austerity, are undermining activity and demand with little evidence of this situation improving anytime soon, Markit senior economist Paul Smith said.
Greek firms struggled to access working capital and meet vendor demands for cash payments to deliver inputs. The fall in production led to more job losses.
While companies are trying to maintain employment via reduced working days and hours, the inevitable impact of rapid declines in output and sales are further cuts to payroll numbers, which fell at a marked and accelerated pace, Smith said.
Greece's unemployment rate hit 20.9 percent in November, the latest available data, highlighting the pain of higher taxes and cuts in public sector pay and pensions which suppress economic activity.
Manufacturers adjusted to competition and weak demand with discounts, meaning their margins remained pressured as output prices fell at the sharpest rate in 33 months.
Deteriorating conditions led firms to lower their purchasing activity and reduce inventories to cut costs. Higher prices paid for fuel, plastics and steel led to a rise in average purchase costs in February.
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(Reporting by George Georgiopoulos; Editing by Toby Chopra)