Italy: Operating conditions firmly in contractionary terrain at the outset of Q3
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) inched up to 48.5 in July from June’s 48.4. The index thus remained entrenched below the crucial 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been for 10 months in a row.
The deterioration came on the back of falling output and new orders, both of which fell for a whole year. Moreover, new foreign orders also contracted, especially weighed down by contracting demand from Turkey and North Africa. Consequently, manufacturers reduced staff, although at a soft pace, while backlogs of work declined again. Input costs, meanwhile, fell for the second month running, again due to lower prices for raw materials. Consequently, firms cut their output prices, amid intense competitive pressure. Lastly, business confidence continued to dip but remained in optimistic terrain, supported by a positive outlook on sales activity later this year.
Commenting on the outlook, Amritpal Virdee, an economist at IHS Markit, remarked:
“The Italian manufacturing economy started the third quarter in contraction territory […]. The immediate prospects for the sector look insecure, with declining backlogs pointing to further spare capacity and scope for further reductions in output and employment.”