Operating conditions in Italy’s goods producing sector improved at the fastest pace since May 2007 during December. 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 – rising from 52.0 in November to 54.7. Higher production, new order volumes and increased purchasing of inputs all contributed to the improving picture in the final month of 2010. Furthermore, jobs in the sector were created at the fastest pace since April 2006.
Manufacturing output in Italy rose for the 15th successive month during December, as higher new order levels raised production requirements in the sector. Moreover, the latest monthly rise was the strongest since July.
Latest data highlighted a return to new order growth at Italian manufacturing firms, following a mild decline in November. Incoming new business levels have risen in fourteen of the past 15 months. Participants linked the latest rise to signs of improving market demand.
New export orders were also reported to have risen on the month, thereby extending the current sequence of growth to fourteen months. Anecdotal evidence from survey respondents suggested that strong demand from emerging markets, in particular in Latin America, had been the principal driver.
Reflecting the solid increases in output and new order levels in December, Italian manufacturers raised their staffing numbers for the first time since July. Moreover, the pace of job creation was the strongest in more than 4.5 years.
In December, the average cost of inputs in the Italian goods producing sector rose at a considerable pace that was the fastest since May. According to panelists, rising raw material costs were the primary source of inflation. Firms also mentioned higher textile and steel prices.
Panelists were able to pass on only some of December’s cost increases to clients in the form of higher charges. Nonetheless, the latest increase in average selling prices was the steepest since August 2008.
Despite the strong inflation of costs, higher production requirements and attempts to restock warehouses led to the strongest rise in manufacturers’ purchase levels since July. Consequently, panelists’ holdings of raw materials and semi-manufactured goods rose for the second month in a row, and at the fastest pace in two years.
Holdings of finished goods, on the other hand, fell at a considerable pace during December, extending the current period of destocking to 21 months.
Andrew Self, economist at Markit and author of the Italian Manufacturing PMI, said: “The Italian manufacturing sector rounded off 2010 on a positive note, as conditions improved at the fastest pace since May 2007. Strong output growth was finally reflected in a solid rise in headcounts, as goods producers created jobs at the fastest pace in 4.5 years. The survey also highlighted some evidence of rising pricing power, as firms increased charges at the strongest rate since August 2008. That said, manufacturers may have been forced to play this hand by the relentless upward trend in input prices.”
