Survey data for April signaled a further sharp deterioration of operating conditions in the Italian manufacturing economy. However, the rates of decline recorded for production and new business were the slowest for six and seven months, respectively.
At 37.2, up from the survey low of 34.6 in March, the headline Markit/ADACI Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to provide a single-figure snapshot of the health of the manufacturing economy – signposted the weakest deterioration of conditions since October last year. Output at Italian manufacturers fell at the weakest pace since last October, although the rate of decline remained historically steep. Companies reported that lower new orders was the key factor reducing output during the month.
Poor domestic and global demand was cited by responding firms as the principal force negatively impacting on new business during April. Orders from abroad fell for a 14th successive month, with sales particularly weak from Eastern Europe. The Italian manufacturing workforce was reduced for the 15th month in a row during April, as manufacturers’ demand for staff deteriorated in line with falling workloads. Furthermore, the rate of job shedding was only fractionally below the series record decline seen in the previous survey period.
Stocks of post-production inventories fell for the first time since June 2008 during April, and at the fastest pace for nearly three years. Anecdotal evidence indicated that marked reductions in output, alongside successful attempts to lower stock holdings, had been the key factors lowering inventories during the month. Input prices fell for the sixth month in a row during April. Moreover, the rate of decline was only marginally below the survey-record drop seen in March. Manufacturers indicated that the underlying price of raw materials had continued to fall during April and that a steep reduction in purchasing activity had forced vendors to lower charges.
Any savings from lower input prices were swiftly passed onto clients in the form of lower factory gate prices during April. Companies reported that the economic downturn had created an increasingly competitive marketplace, forcing them to lower tariffs. However, the rate of discounting was weaker than that seen in each of the two preceding months.
Commenting on the Italy Manufacturing PMI survey data, Andrew Self, economist at Markit Economics, said: “April data showed that both the output and new orders indexes rose for the second successive month, suggesting that the pace of the downturn is beginning to ease. While these rises in index values are heartening, conditions in the manufacturing sector still remain dreadful overall and continued to deteriorate at a considerable pace. Marked falls in employment will temper any prospect of a swift return to growth, as household spending looks set to weaken.”
