German manufacturing recovery speeds up in August

Italy's manufacturing sector entered contraction in August for the first time since January, according to data released by S&P Global. The S&P Global Manufacturing Purchasing Managers' Index (PMI) for Italy fell to 49.6 in August, down from 51.3 in July, indicating a shift from growth to contraction. The index measures manufacturing performance across several indicators, with new orders decreasing for the second consecutive month, marking the steepest decline in nearly 18 months.

Export sales also declined, albeit at a slower rate than domestic orders. Output production dropped for the first time in seven months, primarily affecting intermediate goods producers. Input purchasing plummeted, recording the fastest decline in nearly a year, as companies reduced production in response to weaker demand. Inventory levels dropped, marking the first decrease in pre-production stocks in three months.

Supply chain disruptions continued to impact the sector, with delivery times lengthening due to material shortages and transport issues. The ongoing Middle East war exacerbated supply chain pressures. Input price inflation slowed to its weakest level since February, but raw materials, energy, freight, and transportation costs remained high.

Manufacturers attributed price increases to the Middle East conflict. Output price inflation eased to a five-month low, but companies continued to absorb part of their cost increases. Employment remained relatively stable, with companies adding workers modestly compared to July's cuts. Backlogged orders fell more rapidly. Business confidence improved, with nearly half of manufacturers expecting output growth over the next year.

Companies cited improving market conditions, new product launches, and expansion plans. S&P Global economist Eleanor Dennison noted that manufacturers hope for a market recovery by year-end, as subdued conditions and reduced input demand gradually ease cost and supply chain pressures.