ATHENS – Sentiment on Greece's economy weakened slightly in September as a marked drop in consumer confidence offset improved prospects in industry and services, the country's leading economic institute said on Thursday.
The Foundation for Economic and Industrial Research (IOBE) said its index - based on consumer confidence gauges and indexes for business expectations in manufacturing, construction, retail and services - dropped to 76.1 points from 77 in August, far below its average level of 100 between 1996 and 2006.
Athens is struggling to strike a deal with its 'troika' of lenders -- the European Commission, European Central Bank and International Monetary Fund -- on a further two-year austerity package worth nearly 12 billion euros ($15 billion) to get its next aid tranche.
The measures will include cuts in public sector pay, pensions and welfare benefits to get the budget to a primary surplus for the first time since 2002.
"The fall in consumer confidence was marked but expected. Consumers have been getting contradictory signals on the content of new fiscal measures in the last two months," IOBE said.
It said the government needs to finalize the content of the austerity package and devote time to devising ways to counteract its recessionary impact.
Greece's economy is projected to contract for a sixth straight year in 2013, with national output seen declining by 3.8 percent according to the latest government forecasts. The new savings are expected to prolong the economic slump which has already driven the jobless rate to 24.4 percent.
With unemployment at record levels and wages squeezed by higher taxes, Greek households remain the most pessimistic in Europe - followed by consumers in Portugal, Cyprus and Hungary.
Based on the survey, 80 percent of Greek consumers expect their household's finances to deteriorate in the next 12 months.
The modest drop in Greece's overall economic sentiment in September was in line with a fall in the broader euro zone sentiment reading in the same month to 85 from 86.1 in August.
(Reporting by George Georgiopoulos; Editing by Ruth Pitchford)