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PATRIS MACRO - Italian Markit manufacturing PMI fell into contraction territory in October

2 Nov 2018


Eurozone: October Markit Manufacturing PMI (final):

Key conclusions: The Markit manufacturing PMI for the euro was revised slightly downwards (from 52.1 to 52.0), which put the decline recorded in October in 1.2 points. This is the lowest reading since August 2016. The September/October average stands at 52.6 (vs. 4Q18 average of 54.3), suggesting that the slowdown of the eurozone manufacturing sector is continuing in 4Q18.

The country data showed Italy slipping into contraction territory, after registering its lowest PMI reading in just short of four years. Growth in Germany was the weakest in nearly two-and-a-half years, while France and Spain registered only modest expansion in manufacturing activity. Ireland, Austria, the Netherlands and Greece registered all slower rates of expansion in October.

The new orders sub-index posted the first value in contraction territory since November 2014 (although only marginally below 50).New export orders declined for the first time since mid-2013. The production sub-index fell to the lowest level since December 2014. Employment growth continued to slow, easing to the lowest level since December 2016. Input inflation accelerated in October, while output charges were raised (albeit at the lowest level in 14 months). Business confidence for the year ahead fell to the lowest level since the end of 2012.


Spain: The Markit manufacturing PMI rose 0.4 points in October to 51.8 (vs. consensus 50.9). The September/October average stands at 51.6, which compares to 3Q18 average of 52.4, suggesting that the manufacturing sector in Spain continues to lose momentum during the last quarter of the year.

According to the press release disclosed by Markit, output and new orders sub-indexes rose in October (although both remain lower than earlier in the year). Confidence regarding the future fell to the lowest level since June 2013 (on the back of the recent downturn in underlying demand, worries over global trade and political uncertainties). New export orders rose at the fastest pace since July, with the press release citing that a number of panelists reported an upturn in demand, especially from international clients. On the price front,output charge inflation accelerated to a three-month high, reflecting higher input prices.

Italy: The Markit manufacturing PMI fell by 0.8 points in October to 49.2 (vs. consensus 49.7). this is the first reading below 50 since August 2016. The September/October average stands at 49.6 (vs. 3Q18 average of 50.5), suggesting that the output for the Italian manufacturing sector could contract in 4Q18.

The details of the survey showed declines in both output and new orders. The decline in production was the third in successive months (with the sub-index reaching the lowest level in almost five-and-a-half years), as the downturn in order books gathered pace. New business from abroad also fell in October, after an almost six-year sequence of expansion. According to the press release disclosed by Markit, there were reports of weaker demand from key export partners, especially in Asia.

Other countries: The final Markit manufacturing PMI in France stood at 51.2, unchanged from the flash reading, and representing 1.3 points fall in October. In Germany, the PMI was slightly revised downwards (from 52.3 to 52.2), and is now 1.5 points below the September reading. Greece (-0.5 points to 53.1, the lowest reading since April), Ireland (-1.4 points to 54.9, to the lowest level since March), the Netherlands (-2.7 points to 57.1, the lowest level since January 2017) and Austria (-1.2 points to 53.8, the lowest reading since September 2016) all posted declines in October.


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