Italy’s factories had their worst month since the height of the pandemic lockdowns in early 2020, adding to concerns that the euro zone’s third-biggest economy faces a sharp slowdown.
(Bloomberg) — Italy’s factories had their worst month since the height of the pandemic lockdowns in early 2020, adding to concerns that the euro zone’s third-biggest economy faces a sharp slowdown.
A purchasing manager index compiled by S&P Global and published Monday fell to 43.8 in June from 45.9, well below the lowest estimate in a Bloomberg survey of economists. A reading below 50 indicates that industrial output is contracting.
Italy’s economy fared better than expected at the start of the year, expanding by 0.6% in the first quarter. But higher interest rates from the European Central Bank and slowing global demand have depressed factory activity in recent months, even as services and consumer confidence remain solid.
A collapse in industrial output may stoke further criticism of ECB monetary policy by Italy’s rightwing government. Last week, Premier Giorgia Meloni slammed what she described as a “simplistic recipe of increasing interest rates,” a position echoed on Monday by industry minister Adolfo Urso in an interview with Il Messaggero.
Evidence of deterioration in manufacturing chime with the view from Confindustria, Italy’s main business association, which said last week that the economy is showing waning momentum.
The manufacturing slowdown will likely continue because new orders are also falling sharply, S&P Global said. While the fastest drop in raw-material costs since April 2009 might cheer companies, that’s likely to be a sign of further woe.
“The recession in Italian industry, which the sector entered in the second half of 2022, seems to be deepening,” said Tariq Kamal Chaudhry Economist at Hamburg Commercial Bank. “Enthusiasm for falling input prices and backlogs of work is likely to be muted because it has become primarily an expression of a pronounced weakness in demand.”
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