The Italian manufacturing sector contracted for the first time in two years in October amid a sharp drop in new orders, production and exports, the IHS Markit poll showed on Friday.
The Purchasing Managers Index or PMI for the manufacturing sector fell to a 46-month low of 49.2 from 50.0 in September. The value was below the projected level of 49.7. Any value below 50 implies shrinking the sector. PMI was below neutral for the first time since August 2016.
Both output and sales declined for the third month in a row. Sales fell harder in just five and a half years. Export orders fell for the first time in the past six years, amid weaker demand from key export partners, especially in Asia. Meanwhile, enterprises continued to increase the number of employees, albeit at a slow pace, as they hope for a recovery in domestic demand. The backlog was reduced for the seventh consecutive month, and manufacturers continued to increase inventory at the fastest pace in four years. However, they reduced their procurement activities for the fourth month in a row. Inflation in input costs sped up a bit, and therefore, firms raised selling prices, albeit more slowly than in September.
Italian manufacturers remained optimistic, although sentiment has weakened since September due to concerns about political stability and future export trade.