Italy Manufacting PMI March 2008

Well, as they say colloquially, it never rains but it pours, and this seems to be a very adpt description of Italy's current economic predicament, and one piece of bad news simply piles right up after another. This time it is Italy's manufacturing industry which is coming under the anvil, since it contracted in March for the first time in nearly three years as output slowed to near stagnation and exports declined. At least this is the picture we can discern from the latest reading given by the NTC/ADACI Purchasing Managers' Index, which measures activity in the manufacturing sector, and which fell in March below the 50.0 mark separating growth from contraction reaching 49.4, its lowest level since June 2005.

"The slowdown largely reflected a fall in new orders from both domestic and foreign markets. Operating conditions were further worsened by the fastest rate of cost inflation for 20 months," NTC/ADACI said. NTC Research chief economist Chris Williamson said the figures were consistent with stagnation in the first quarter and added there could be a worsening in the second quarter given the fall in new orders.

The seasonally adjusted output index fell to 50.4 from 51.3 in February, reflecting the slowest rate of expansion in the current period of growth and down sharply from the average of 55.2 seen last year. Citing inflation reducing customer purchasing power, fewer than 26 percent of companies surveyed reported output growth. Output prices, at 57.8, rose at their fastest rate since October 2006 while the input price index, at 69.0, was at its highest since July 2006.

The strong euro/dollar exchange rate and uncertainties in the global economy were blamed for the export downturn which saw Italian exports stagnate in February and decline in March, with that index at 48.7, a level not seen since May 2005. The worst-hit sector was consumer goods where output contracted for the fourth month running. Investment goods output grew at a faster rate than in February while intermediate goods grew at a slower pace than in the previous month.

The PMI is the latest in a string of data pointing to a serious downturn in the Italian economy. Business confidence hit its lowest for 31 months in March and consumer morale was at its lowest in almost four years.