Italian manufacturing companies recorded a further improvement in operating conditions during November. However, the pace of increase slowed since October. This was signaled by the seasonally adjusted Markit/ADACI Purchasing Managers’ Index (PMI) – a composite indicator designed to provide a single-figure snapshot of manufacturing performance – falling from 53.0 to 52.0, the lowest reading since February.
Output in the sector rose for the 14th month in a row during November, although the rate of growth eased to the weakest since October 2009. Where higher production levels were posted, this was frequently linked to restocking activities. As a result, Italian manufacturers’ stocks of finished goods fell at the slowest rate in the current 20-month period of decline.
The moderation in output growth primarily reflected the first drop in new business levels since September 2009, albeit at only a fractional pace. According to participants, the fall was driven by weak demand and fewer orders from public sector clients.
Latest data continued to highlight a divergence between domestic and overseas demand, as falling levels of new orders overall contrasted with a modest rise in the volume of new business received from export markets. New product launches and competitive pricing strategies were widely commented on as the key drivers of new export order wins.
In response to higher output, Italian goods producing firms raised their buying levels again in November, thereby extending the current period of increase to one year. Nevertheless, the pace of growth was only mild, as weak order levels subdued firms’ purchasing activity.
The combination of higher purchasing and attempts to raise stock holdings in anticipation of future inflation of raw material costs led to the first rise in pre-production inventories since December 2008.
Extending the current sequence to four months, employment levels in the sector fell during November. Nonetheless, the pace of reduction was only mild. Survey participants often linked staff shedding to company restructuring policies.
Latest data highlighted an acceleration of cost inflation in the Italian manufacturing sector, which panelists frequently linked to higher raw material costs. As a result, average charges were raised at the fastest pace since August 2008.
When asked to comment more generally on operating conditions in the sector, a number of firms indicated that the implementation of the SISTRI waste tracking system had caused a number of problems for day-to-day activities.
Andrew Self, economist at Markit and author of the Italian Manufacturing PMI, said: “The Italian manufacturing sector recovery was maintained in November, but headwinds appear to be gaining strength. Highlighting this, output growth slowed and anecdotal evidence suggested that where higher output was recorded, this was often used to fill warehouses. New order levels fell for the first time since September 2009 and cost pressures accelerated. The data also indicate that the decline in new business was focused on the domestic market, as new export orders continued to grow, albeit at a moderated pace.”
