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Italian manufacturing sector growth weakens again in May

Staff Writer | June 5, 2018
Italy’s manufacturing sector continued to expand during May, but again at a slower rate as signs of softer demand, especially from abroad, translated into weaker gains in output and new orders.
Italian manufacturing
Italy   Companies took on extra staff
Companies nonetheless took on extra staff and were able to make notable inroads into their backlogs of work.

On the price front, cost pressures continued to intensify as shortages of stock and rising demand empowered suppliers.

Output charges were raised again, but at the slowest rate of the year so far.

The headline IHS Markit Italy Manufacturing Purchasing Managers’ Index (PMI) – a singlefigure measure of developments in overall business conditions – fell to 52.7 during May, down from 53.5 in the previous month and the lowest level for a year-and-a-half.

Having hit a near seven-year high of 59.0 at the start of the year, the PMI continues to lose noticeable momentum.

Underpinning the slowdown in the PMI were weaker gains in both output and new orders.

Both indicators posted their lowest readings since October 2016, amid reports of softer underlying demand.

This was especially the case in export trade, where growth in new orders from abroad was at its weakest level since August 2016.

Panellists reported that sales to China and the USA were the most notable sources of weakness.

Despite the setbacks in growth of both output and new work, Italian manufacturers continued to add to their workforce numbers during May.

Latest data showed that employment rose for a forty-first month in succession as firms sought to bolster capacity.

This enabled companies to keep on top of their workloads as signalled by the strongest decline in backlogs of work for two-and-a-half years.

Meanwhile, latest prices data showed average input costs rising sharply again in May.

Commodities and raw materials were reported to be generally higher by the 30% of the survey panel that recorded an increase in prices.

Just over 13% of manufacturers responded to their higher operating costs by raising their own charges.

However, the overall rate of output price inflation was the lowest recorded by the survey since last year.

Higher raw material prices were linked to ongoing stock shortages at suppliers.

May data showed that vendor performance deteriorated markedly again during the month, in part also driven by rising demand.

Purchasing activity rose further during May, and contributed to the greatest accumulation of input inventory since April 1998.

Finally, business optimism remained high during the latest survey period amid positive projections for demand and investment.