Italy: Manufacturing sector loses further steam but continues to expand in May
June 1, 2018
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) came in at 52.7 in May, below April’s 53.5. The index thus moved farther away from the seven-and-a-half year high reached at the start of this year and was the lowest reading since November 2016. The index nevertheless remained above the crucial 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been for 21 consecutive months.
May’s result came on the back of softening expansions in output and new orders, which recorded the slowest pace of expansions since October 2016. Growth in output and new orders was restrained by weaker demand, especially external, with sales to China and the U.S. giving signs of notable weakness. Backlogs of work decreased at the fastest pace in two-and-a-half years, despite sustained pressure on manufacturing capacity, as companies continued to hire more staff—a trend that has been ongoing for over three years. In terms of price developments, input costs rose strongly due to growing capacity and higher prices for commodities and raw materials, which translated into rising output prices. Lastly, optimism towards future production remained strong, fueled by positive projections for demand and investment.
Paul Smith, Director at IHS Markit, commented:
“Whilst a number of temporary factors (such as poor weather in the first quarter) have exacerbated the downward trend, the slowdown continues to be primarily linked to global capacity constraints, which has led to sharply rising delivery times and difficulties in sourcing inputs for production.”
Italy Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists see fixed investment growing 2.5% in 2018, which is unchanged from last month’s estimate. For 2019, the panel expects fixed investment to increase 2.1%.