Italy: Manufacturing sector loses steam in July but continues to expand
August 1, 2018
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) declined to 51.5 in July from June’s 53.3. The index nevertheless remained above the crucial 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been for nearly two years.
July’s result was negatively affected by near stagnations in output and new orders, due to faltering domestic and external demand. Because of subdued orders and production, companies’ purchasing activity declined, while inventories of both inputs and finished goods rose. On the other hand, backlogs of work continued to decline, as companies—which have created new jobs for over three-and-a-half years—hired staff at a robust, albeit softening, pace. Input costs, meanwhile, continued to rise due to higher prices for paper, plastics and fuels. This prompted firms to raise their output prices. Lastly, although business confidence remained optimistic, it was clouded by worries over future export trade.
Paul Smith, director at IHS Markit, commented:
“The pick-up in growth seen during June proved to be short-lived, with early Q3 data showing a further loss of momentum in Italy’s manufacturing sector and a resumption of the general trend seen throughout much of 2018 to date. […] Based on the latest set of PMI survey data, and with worries mounting over any escalation of global trade tensions on export trade, Italy’s industrial base may well struggle to meaningfully contribute to wider economic growth in the second half of 2018.”
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%.