Italy: Manufacturing sector continues to contract in December
January 2, 2019
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) inched up to 49.2 in December from November’s near four-year low of 48.6. The index nevertheless remained below the crucial 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been for three months in a row.
The deterioration in operating conditions came on the back of falling production and new orders, both of which recorded the fifth consecutive month of contraction. New orders continued to decline on the back of lower domestic and external demand, which translated into another month of falling output. However, manufacturers continued to hire, although at the weakest pace in four years, leading backlogs of work to drop and inventories of finished goods to rise. Input costs, meanwhile, rose at the slowest pace in over two years, which caused output inflation to also decelerate. Lastly, business confidence continued to weaken, weighed down by pessimistic demand expectations. Andrew Harker, associate director at IHS Markit, commented that:
“December PMI data completed a worrying end to the year for Italian manufacturers, with firms continuing to struggle to secure new business. This is in marked contrast to the start of 2018 when the sector was experiencing strong growth. Moreover, with business confidence at a six-year low, there appears little sense of optimism that the current soft patch will come to an end in the near future."
Italy Fixed Invesment Forecast
FocusEconomics Consensus Forecast panelists see fixed investment growing 2.1% in 2019, which is unchanged from last month’s estimate. For 2020, the panel expects fixed investment to increase 1.8%.