Italy: Operating conditions improve but remain in contractionary territory
June 3, 2019
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) rose to 49.7 in May from April’s 49.1. The index thus remained below the crucial 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been for eight months in a row.
The improved print benefited from a softer contraction in output and new orders. That said, new orders fell for the 10th consecutive month, as did production, but they both contracted at the softer pace in seven months. A slowdown in the automotive and clothing markets led the drops. Meanwhile, new foreign orders also dipped, weighed down by weaker demand from Poland and Czech Republic. On the other hand, manufacturers hired more staff, although the pace of job creation was only marginal, which helped manufacturers reduce backlogs of work again. Input costs, meanwhile, rose at the slowest pace in four months, fueled by higher prices for raw materials. This led firms to increase output prices, although only softly. Lastly, business confidence rose to the highest level in eight months, supported by an improved outlook on customers’ demand.
Commenting on the outlook, Amritpal Virdee, an economist at IHS Markit, remarked:
“The Italian manufacturing sector recorded its softest contraction since September 2018, with forward looking indicators suggesting a more positive outlook as we move into summer.”
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%.