Italy: Manufacturing sector nears stagnation in August
September 3, 2018
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) declined to 50.1 points in August from July’s 51.5. As a result, the index remained just above the crucial 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been for two years. However, August’s print also marked the weakest reading in two years.
The result was driven by a fall in new orders—the first decline in two years—and a slight decline in output, against the backdrop of waning domestic demand. In line with weaker orders and production, job growth slowed markedly in August, amid declining backlogs of work and slowly increasing inventories. Meanwhile, despite a sustained increase in input costs, output prices decelerated to a one-year low as soft domestic demand reportedly forced manufacturers to rely on discounts to stimulate sales. Lastly, business confidence fell to a five-year low amid growing worries over global trading conditions in the coming months.
Paul Smith, director at IHS Markit, commented:
“August saw the continuation of this year’s general trend of slowing growth, with latest data now consistent with a broad stagnation of the manufacturing sector. At current levels, the PMI data suggest industry may well provide a net negative contribution to wider GDP levels in the third quarter of the year. […] Unless we see a pick-up in demand – be it from at home or abroad – the recent trends in the data raise the spectre of the sector tipping into technical recession during the second half of 2018.”
Author: Almanas Stanapedis, Economist