Italy: Manufacturing sector starts the new year in dire conditions
February 1, 2019
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) fell to 47.8 in January from December’s 49.2, marking the worst reading in close to six years. The index therefore moved further below the crucial 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been for four months in a row.
The deterioration in operating conditions came on the back of falling production and plunging new orders, both of which recorded the sixth consecutive month of contraction. New orders contracted heavily on the back of shrinking domestic and external demand, which translated into a sharper contraction in output. Foreign demand from key export partners in the EU was especially weak. Moreover, manufacturers downsized staff for the first time in over four years, while inventories of finished goods declined. Input costs, meanwhile, rose at the slowest pace in over two years. Weak input inflation together with companies’ struggle to boost sales led firms to reduce output prices for the first time in over two years. The only bright spot was a slight uptick in business confidence, which followed a six-year trough in December, motivated by somewhat rosier expectations on overseas demand.
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%.