Italy: Manufacturing sector stagnates in September
October 3, 2018
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) dipped to an over two-year low of 50.0 in September from August’s 50.1. The index thus now rests on the crucial 50-point threshold that separates expansion from contraction in the manufacturing sector.
The different sub-indexes paint a coherent picture of stagnation in the manufacturing sector. Both output and new orders contracted slightly for a second consecutive month, due to faltering domestic demand only partly offset by modestly rising export orders. Because of declining orders and production, inventories of finished goods continued to rise, backlogs of works fell for the sixth consecutive month and the pace of job creation was the weakest since the start of 2015. Input costs, meanwhile, continued to rise due to higher prices for steel and global stock shortages, which prompted firms to raise their output prices. However, the pace of increase cooled to a 13-month low. On the other hand, business confidence remained optimistic, and also improved thanks to positive future export trade projections.
Paul Smith, director at IHS Markit, commented:
“September's stagnation of Italy's manufacturing sector was not especially surprising given recent trends, which have shown output and new orders recording a noticeable slowdown since the start of the year. Whilst the easing growth trend has been driven in part by a wider weakening of the global trade cycle, recent developments have again shown up the underlying weakness within Italy's own domestic markets and a general reliance on exports to support economic growth.”
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%, also unchanged from last month’s projection.