- Prior 43.8
Italian manufacturing activity improved slightly in July but still sits in contraction territory, as the downturn eases ever so slightly. Output and new orders are both still registering sharp declines but falling demand and improved supply is at least leading to a steep drop in input prices. HCOB notes that:
"As the third quarter kicks off, Italian industry remains mired in its now roughly one year old recession. The manufacturing sector is experiencing a massive slump in demand, reflected by declining output, dwindling backlogs of work and decreasing purchasing volumes. High uncertainty seems to be one of the factors behind the continued lacklustre performance, as reported by a number of surveyed companies.
"Weak demand has led to a collapse in output prices for manufactured goods. This may be welcome news for central bankers and consumers, but it means most probably lower profit margins.
"The previously highly resilient labour market is showing signs of exhaustion. Manufacturers continue to hire, but employment growth has lost momentum and companies can be expected to cut their workforce over the next few months. However, we do not expect mass layoffs due to the structural shortage of skilled labour.
"Input prices are plummeting at a high rate, while delivery times are normalising quickly. This fits to the anecdotal evidence from surveyed companies that clients are engaged in destocking. Lower input costs and faster shipments can be especially observed in the sector of investment goods which has the strongest downward momentum. This should worry the government as the investment ratio (as share of GDP) is lagging behind its peers France and Germany, costing competitiveness.”
