Italy: Manufacturing sector contracts at the sharpest pace in almost four years in November
December 3, 2018
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) dipped to a near four-year low of 48.6 in November from October’s 49.2. The index thus moved further below the crucial 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been for two months in a row.
The deterioration in operating conditions came on the back of falling production and new orders, both of which recorded the fourth consecutive month of contraction. New orders continued to decline on the back of subdued domestic demand and of the second sequential contraction in export orders. This translated into another month of falling output, which decreased at the fastest pace in over five years, especially due to shrinking customer demand for automobiles. Meanwhile, backlogs of work dropped, and inventories of finished goods rose. However, manufacturers continued to hire, hoping demand would strengthen going forward. Input costs, meanwhile, rose notably, albeit at the slower pace since July 2017, due to higher prices for raw materials—especially oil and plastic—which prompted firms to raise their output prices. To complete the negative picture, business confidence continued to weaken. However, looking to the future, Paul Smith, director at IHS Markit, added a note of optimism:
“[Business confidence] was undercut by concerns over political fears of a domestic economic slowdown. Looking forward, with the hopeful conclusion of the government budget negotiations with Brussels and the effective resolution of the Italian banking infrastructure, business confidence may strengthen from its current weak level.”
Italy Fixed Investment 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%.