Italy Heads For Second Lost Decade As Manufacturing Sinks At Worst Rate In 6 Years

Italy's GDP is still below the 2008 level. It's about to get worse as manufacturing sinks at the worst rate in 6 years.

Italy is back in recession for the third time in a decade. This one may be particularly hard as Italian Manufacturing Shrinks at Worst Rate in Six Years.

  • Italy's purchasing managers’ index (PMI), a measure of business conditions in the sector, sank to 47.8 in January - a sharp drop from 49.2 in December, and below the 50 neutral mark. This meant the sector has been shrinking for the fourth consecutive month.
  • Jobs in industry fell for the first time in four years in January as new orders dropped sharply and output was down.
  • New orders fell for the sixth consecutive month, suggesting that output in subsequent months may be lower.
  • The slowing Italian sector dragged on the eurozone overall, which was close to standing still. The overall PMI was 50.5, down from December’s reading of 51.4, increasing the chances that it is now in recession.
  • Germany also dragged on overall eurozone figures, as its powerful manufacturing sector contracted for the first time in four years. Again, this is likely to worsen further as new orders fell at the fastest rate in more than six years.

Eurozone Manufacturing

Those are all considered "soft" data points as the PMI is a diffusion index. However, the soft data matches the hard data as the latter shows Italy suffered second quarter of GDP contraction.

With that, let's dive into the IHS Markit Eurozone Manufacturing PMI for more details.

Key Findings

  • Final Eurozone Manufacturing PMI at 50.5 in January (Flash: 50.5, December Final: 51.4)
  • Output up marginally, but sharpest fall in new work recorded since April 2013
  • Growth sustained via reduction in backlogs and fastest accumulation of stocks in survey history

The headline index has now fallen for six consecutive months and stood in January at its lowest level since November 2014.

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