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Manufacturing in Italy continues to expand healthily, inflation increases

Staff Writer | April 4, 2018
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) came in at 55.1 in March, below February’s 56.8 and the lowest reading in eight months.
Italy   FocusEconomics
The index nevertheless remained comfortably above the crucial 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been for 19 consecutive months.

March’s result came on the back of softening expansions in output and new orders. Growth in output and new orders nonetheless remained robust, supported by healthy demand.

Backlogs of work continued to increase for the eleventh consecutive month, signaling sustained pressure on manufacturing capacity.

This prompted businesses to expand their workforces markedly, continuing a trend that has been going on for the last three years. In terms of price developments, due to growing capacity constraints, input costs rose notably.

This was reflected in rising output prices, although the pace of increase moderated compared to February. Lastly, optimism towards future production remained strong but declined from the previous month.

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%.

According to provisional data released by the National Statistical Institute (Istat) on 30 March, consumer prices rose 0.4% on a monthly basis in March, up from February’s flat reading.

The figure mainly reflected higher prices for processed food including alcohol, and for tobacco and services related to transport—which were affected by seasonal factors.

Meanwhile, inflation came in at 0.9% in March, above the previous month’s 0.5% print.

Core consumer prices, which exclude more volatile categories such as unprocessed food and energy, grew 0.5% in March month-on-month, following February’s softer 0.1% rise.

Consequently, core inflation was 0.9% in March, up from February’s 0.6%. Finally, harmonized inflation came in at 1.1%, above February’s 0.7%.

FocusEconomics Consensus Forecast panelists expect inflation of 1.4% in 2018, which is unchanged from last month’s projection. For 2019, panelists expect inflation to average 1.5%.