- Prior 45.9
That’s a bit of a bummer as Italy’s manufacturing shrinks at its steepest rate since Covid lockdowns. And that highlights further the deterioration in demand conditions throughout the region towards the end of Q2. HCOB notes that:
“The recession in Italian industry, which the sector entered in the second half of 2022, seems to be deepening. With an
index value of 43.8 for June, the HCOB PMI for the manufacturing sector is as low as during the outbreak of the Corona
pandemic in spring 2020. Together with the figures for industrial production in April, this points to an even sharper slump in
the sector in the current quarter.
“This statement is also supported by the HCOB PMI sub-indices for output and quantity of purchases, which also fell sharply.
A major reason for the weakness of this capital-intensive sector is likely to be the sharp rise in borrowing costs as a result of
the ECB’s interest rate hikes.
“The enthusiasm for falling input prices and backlogs of work is likely to be muted because it has become primarily an
expression of a pronounced weakness in demand. The accelerated decline in output prices over the past four months points
in the same direction, indicating a weakening of companies’ pricing power.
“Not only the present but also a look into the future is not convincing. Domestic and foreign orders declined in June and are
now shrinking substantially, with the manufacturing sector broadly supported only by existing orders. The duration of
production secured by the current order backlog according to the DG ECFIN Survey is still just under 7.5 months, which is,
however, very high by historical standards. In the coming months, the industry could, however, be supported by funds under
the NextGenerationEU program, which are currently awaiting release due to disagreements between Rome and Brussels.”
/EUR