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Fall In Manufacturing PMI Input Prices Not Reflected In Output Charge Disinflation

ITALY DATA

Italian December manufacturing PMI was firmer than expected at 45.3 (vs 44.2 cons, 44.4 prior), but remained in contractionary territory for the 9th consecutive month. While input prices appeared to moderate in December, the release indicated that pass-on to consumers was muted.


Key notes from the release are:

  • "Pressure on supply chains eased further in December" helping reduce delivery times, while falling energy and raw material prices put downward pressure on operating expenses. However, in contrast to Spain, "firms chose not to pass on the full benefit of input price reductions to customers as selling prices were reduced only fractionally".
  • Production and new orders drove the headline rate weakness due to "domestic and foreign demand weakness", the latter particularly from Germany.
  • Employment was steady in December "after two months of job cuts", while Italian goods producers showed signs of spare capacity.

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