Italy: Manufacturing PMI points to the fastest growth in over six years
September 1, 2017
The IHS Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 56.3 in August from 55.1 in July, the highest level in six and a half years and above market expectations of a slight increase to 55.3 points. The index remains firmly above the 50-point threshold that separates expansion from contraction in the manufacturing sector.
August’s increase was largely driven by expansions in both output and new orders. New orders grew at the second-fastest pace since February 2011 on the back of stronger domestic sales and higher new export orders. Growth in output showed the strongest reading in four months, with the highest rise recorded among manufacturers of intermediate goods. Sustained backlogs of work and declining inventories led manufacturers to seek to expand output capacity, as indicated by August’s higher job creation rate compared to July. The overall expansionary environment in the manufacturing sector was accompanied by a pick-up in the quantity of goods purchased, which grew at the fastest pace in four months. In terms of price developments, the rate of input price inflation ticked up, as did average factory gate prices.
Looking at the road ahead for Italian manufacturers, Phil Smith, Principal Economist at IHS Markit, commented:
“Manufacturers will be working hard to replenish depleted stocks and catch up on backlogs, boding well for the immediate outlook for production. However, the survey’s measure of year-ahead expectations, which fell to a 32-month low, suggests there’s a feeling among firms that the pace of growth could slow moving into late-2017 and 2018. The amount of pressure on supply chains points to a sellers’ market for materials, with manufacturers likely to see the continuation of strong purchase price inflation. Whether these costs are borne out in higher consumer prices will depend largely on the resilience of demand.”
Author: Edward Gardner, Economist