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Italian manufacturing conditions deteriorate at quickest pace in November for nearly four years

Steel News - Published on Thu, 06 Dec 2018

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The downturn in the Italian manufacturing sector continued in November as firms indicated marked falls in output and new orders. In addition to the contraction in output, export sales declined for the second consecutive month amid reports of weaker external demand. Meanwhile, confidence towards the 12-month outlook fell to the lowest level since early 2013. On the prices front, input cost inflation moderated to a 16-month low and manufacturers continued to raise their output charges. The headline IHS Markit Italy Manufacturing Purchasing Managers Index, a single-figure measure of developments in overall business conditions, registered 48.6 during November to signal a moderate deterioration in overall business conditions. Down from 49.2 in October, the index was below the critical 50.0 mark for the second consecutive month and at its lowest overall level since the December 2014.

Underpinning the fall in the PMI were declines in both output and new orders. Both indicators were in contraction territory for the fourth successive month in November amid reports of softer underlying demand. Furthermore, output fell at the fastest pace in 67 months. Panellists reported a decrease in customer demand (especially for automobiles).

Despite contractions in output and new orders, Italian manufacturers continued to expand their payroll numbers in November. Latest data showed that employment rose for a forty-seventh month in succession as firms, hopeful of a strengthening in client demand, sought to bolster capacity. This enabled firms to keep on top of their workloads as signalled by a further reduction of incomplete business in November.

Meanwhile, latest prices data showed average input costs rising sharply during November. Greater raw material prices (notably oil and plastic) were noted by firms as the principal factor behind elevated cost burdens. Despite this, the overall rate of inflation was the lowest recorded by the survey since July 2017. Output charges also increased in November, as some manufacturers sought to pass on their greater costs to customers.

Goods producers added to their inventories of finished goods for the fifth month in a row. Despite being modest, the rise was the strongest since February 2009. In contrast, pre- production inventories decreased in November.

Looking forward, overall sentiment regarding the year ahead outlook for output weakened to its lowest level since May 2015 as political uncertainty and fears of an economic slowdown weighed on confidence

Amritpal Virdee, Economist at IHS Markit, which compiles the Italy Manufacturing PMI survey, commented “November's manufacturing PMI survey indicated deterioration in operating conditions in Italy’s manufacturing sector. The PMI dropped to 48.6, the lowest since December 2014. Order book volumes fell for the fourth consecutive month, with export sales declining for the second time in six years. Amidst the negative picture is a bright-spot of sustained employment growth. Payroll numbers have now increased on a monthly basis for nearly four years, as Italian manufacturers hope that customer demand will pick up in the months ahead. However, this positive sentiment was undercut by concerns over political stability and fears of a domestic economic slowdown. Looking forward, with the hopeful conclusion of the government budget negotiations with Brussels and the effective resolution of the Italian banking infrastructure, business confidence may strengthen from its current weak level."

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Posted By : Ratan Singh on Thu, 06 Dec 2018
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