Greek Manufacturing Expands for Second Consecutive Month

Greek manufacturing expanded for a second consecutive month in February, adding to signs that the economy is stabilizing after a six-year recession.

A purchasing managers’ index rose to 51.3 last month from 51.2 in January, London-based Markit Economics said in a statement today. The index was below 50, the level distinguishing expansion from contraction, between August 2009 and the end of last year amid the country’s longest slump since World War II.

“The health of Greece’s manufacturing sector continued to improve during February,” Markit said in the statement. “Latest anecdotal evidence pointed to a strengthening of demand for Greek manufactured goods from both the domestic market and foreign clients. New export orders increased for the second straight month in February.”

The European Commission predicts Greece’s economy will grow 0.6 percent in 2014 after contracting for the previous six years. Adding to signs of improvement, economic sentiment in the country rose to the highest level in more than five years last month.

Greek government bonds have returned more than 17 percent this year, the most of all sovereigns tracked by Bloomberg. The yield on the country’s 10-year benchmark fell below the 7 percent last week for the first time since April 2010, just before Greece signed the first bailout agreement with its euro-area peers and the International Monetary Fund. The debt management agency sold 6-month treasury bills today at 3.6 percent, down from 4 percent in the previous auction on Feb. 4.

Growth Prospects

“All indicators show that the Greek economy has hit the bottom,” Manolis Galenianos, an economics professor at the University of London, said in a telephone interview. “But what we see is not yet a recovery, it’s just a stabilization. The lack of financing for investments and uncertainty weigh on growth prospects.”

The governor of the Bank of Greece, George Provopoulos, warned last week that political and social instability may yet derail the country’s projected economic recovery this year.

“Greece continues to face serious risks,” Holger Schmieding, chief economist at Berenberg Bank in London, said in an e-mailed note today. “The tail risk that the government may founder and that new elections could result in a government that would prefer to turn its back on Europe and the euro is not zero. But it is just a tail risk. The economic indicators show that there is light at the end of the tunnel.”

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