Italy Manufacturing at Eight-Month Low as Growth Momentum EbbsStefan Riecher
Italian manufacturing grew at the slowest pace in eight months in July, evidence that the euro region’s third-biggest economy is struggling to build momentum.
A Purchasing Managers’ Index fell to 51.9, the lowest since November, from 52.6 the previous month. While the result signaled a 13th month of expansion, it was below the median forecast of 52.5 in a Bloomberg News survey of 12 economists. For the euro region as a whole, Markit’s gauge was at 51.8, compared with a prior estimate of 51.9.
The Italian report underscores the challenge faced by Matteo Renzi’s government as he seeks to ignite growth in an economy whose persistent weakness is a concern for European policy makers. Youth unemployment is now at a record and last month the Bank of Italy lowered its 2014 growth forecast to just 0.2 percent, less than a third of its previous prediction.
“Signs of fragility on the demand side impacted on both job creation and purchasing activity,” Markit said. “One area of relative strength remained new export orders which continued to rise at a solid pace, albeit one that was notably slower.”
Italy’s economy contracted by 0.1 percent in the first quarter and joblessness among people aged between 15 to 25 rose to 43.7 percent in June. The statistics agency, Istat, will release its first estimate of gross domestic product for the second quarter on Aug. 6.
In Spain, Markit’s survey also showed slowing, although its index still signalled “solid” factory expansion. The gauge eased from 54.6 to 53.9. The euro region’s fourth-biggest economy grew 0.6 percent last quarter as domestic demand supported the expansion, according to data released this week.
Markit’s index for France was revised higher from a July 24 estimate to 47.8, but stayed below the 50 level that signals expansion. The manufacturing gauge for Germany, Europe’s largest economy, was revised lower to 52.4 from 52.9.
“The plight of the French manufacturing sector is the greatest concern,” Chris Williamson, chief economist at Markit, said in a statement. “It is also disappointing to see a renewed downturn in Greece alongside slowing growth in Spain and Italy.”
Williamson pointed to concerns prompted by the Ukraine crisis and the weakness of price growth in the euro zone. Regional data yesterday showed inflation was at 0.4 percent in July, the lowest since 2009.
“The situation in the euro zone has clearly worsened from the promising signs of economic revival seen earlier in the year,” he said.
The Markit surveys may inform European Central Bank policy makers as they gather for their monthly decision on Aug. 7. Officials have indicated they may refrain from further action for now as they wait to see the effect of an unprecedented package of measures unveiled in June.
“Let’s focus on getting these existing, newly announced measures going” before embarking on further action, ECB Governing Council member Ardo Hansson said in an interview on July 16.