Manufacturing PMI Weaker Than Expected With Demand Conditions Subdued

In contrast to Spain, the Italian May manufacturing PMI was weaker-than-expected at 45.6 (vs 48.0 cons, 47.3 prior), the lowest reading this calendar year.

The report highlights that demand remains weak in the manufacturing sector, prompting a pullback in employment and weaker pricing power amongst firms.

Key notes from the release:

• “All components of the headline PMI exerted negative directional influences in May, excluding stocks of purchases (where the pace of contraction was largely unchanged on the month)”.
• “Manufacturers linked the decline [in new orders] to subdued demand conditions and an increase in uncertainty”.
• “International sales also dropped at a notable and accelerated pace in May, amid reports of ongoing geopolitical tensions and weak demand from European markets in particular”.
• “Reduced output requirements led firms to scale back their purchasing quantities in May”…“As a result, capacity pressure at suppliers eased again in May”.
• “Firms cut workforce levels after three successive months of growth. According to anecdotal evidence, manufacturers opted not to replace leavers in the current demand environment”.
• “Inflationary pressures intensified despite a drop in input buying, with firms blaming increased raw material prices”
• “Charges were reduced again and at a sharper rate”… “as firms attempted to become more price competitive and encourage sales”.