Italy May manufacturing PMI 49.2 vs 49.6 expected

Key findings:

• Slight increase in output ends 13-month run of contraction
• Order books nearly stabilise, supported by a marginal rise in exports
• Input costs fall and delivery times shorten

Comment:

Commenting on the PMI data, Nils Müller, Junior Economist at Hamburg Commercial Bank, said:

“Italy’s manufacturing sector showed further signs of stabilisation in May, with the headline PMI holding just below the
neutral 50.0 mark. While it dipped marginally from April, the underlying dynamics suggest a sector cautiously emerging from
a prolonged downturn. Most notably, output rose for the first time in over a year, driven by new client wins and tentative
signs of demand recovery, particularly from European export markets.

“The improvement in output contrasts with continued weakness in new orders, which declined for a 14th consecutive month.
However, the pace of contraction was the softest in over a year, hinting at a potential turning point. Export orders, in fact,
registered their first expansion in more than two years, buoyed by stronger European demand. Still, domestic demand
remains subdued, with anecdotal evidence pointing to weakness in key sectors such as autos and electronics, keeping
overall order books under pressure.

“Employment continued to decline, albeit modestly, reflecting both voluntary attrition and cautious hiring decisions amid
lingering uncertainty. Meanwhile, input costs fell for the first time since late 2024, thanks to lower raw material and freight
prices. This easing of cost pressures, combined with stable output prices, suggests inflationary forces are receding, offering
some relief to manufacturers and supporting the broader disinflation narrative across the eurozone.

“Looking ahead, the sector’s outlook is cautiously optimistic. More than half of surveyed firms expect output to rise over the
next year – a trend that may be supported by a stronger euro, declining energy prices, and further monetary policy easing by
the ECB. However, trade tensions remain a key risk. Prime Minister Meloni’s mid-May visit to Washington yielded no
immediate tariff relief, leaving Italian exporters exposed to policy uncertainty. For now, the sector appears to be finding its
footing, but the path to sustained recovery remains uneven.”