Italy Manufacturing Sector Contracts For First Time Since 2016

Italy’s manufacturing sector shrunk for the first time in over two years in October, amid a sharp fall in new orders, output and exports, survey data from IHS Markit showed on Friday.

The headline Purchasing Managers’ Index, or PMI, for the manufacturing sector fell to a 46-month low of 49.2 from 50.0 in September. The reading was worse than the 49.7 economists had predicted.

Any reading below 50 suggests contraction in the sector. The PMI was below the neutral mark for the first time since August 2016.

Both output and sales dropped for a third month in row. Sales fell the most in almost five-and-a-half years.

Export orders dropped for the first time in nearly six years amid weaker demand from key export partners, especially in Asia.

Meanwhile, factories kept on adding more employees, albeit modestly, as they hope for a recovery in domestic demand.

Backlogs of work fell for a seventh month in a row and manufacturers continued to add inventories, at the fastest pace in four years. However, they decreased their purchasing activity for a fourth successive month.

Input cost inflation accelerated slightly and consequently, firms raised their charges, albeit at a slower pace than in September.

Italian manufacturers remained optimistic, though sentiment weakened from September due to worries over political stability and future export trade.

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