Home » Industry in contraction in July: it is the first time in two years

Industry in contraction in July: it is the first time in two years

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Industry in contraction in July: it is the first time in two years

After a very positive first half of the year, the Italian and European industry brakes sharply in July and heralds a second part of the year marked by a slowdown.

In July, the manufacturing PMI index in Italy fell to 48.5, the lowest level since June 2020, from 50.9 in June. “The Italian manufacturing sector faced further challenges in July, with a new drop in production and new orders,” said Lewis Cooper, economist at S&P Global Market Intelligence. “The weaker performance saw companies cut back on purchases to slightly mitigate supply problems, but finished product inventories increased dramatically. The easing of inflationary pressures was positive. Business confidence has been particularly low, ”he adds.

Even the IMF confirms that the best period for the Italian economy is behind us. GDP has recovered vigorously from the decline due to Covid and the same goes for employment. Now, however, he faces new challenges, due to the war in Ukraine. This is what we read in the report of the International Monetary Fund on Italy, just published. According to the IMF, Italian growth should slow from 6.6% in 2021 to 3% in 2022, with a further slowdown to 0.75% in 2023 (estimates already emerged in the latest update of the World economic outlook). Unemployment is expected at 8.8% in 2022 and 9.3% in 2023; inflation, respectively, at 6.7% and 3.5 per cent.

“The uncertainty about these forecasts is high and downside risks could materialize and weigh on the outlook, complicating the reduction of public debt”, highlights the Fund.

Same slowdown scenario across Europe. In July, the German manufacturing SME index fell to 49.3 from 52 in June, the lowest level since June 2020, but still better than expected (49.2 the preliminary). «The decline in the index is not a surprise, with warning signs for several months. New orders have been in below 50 territory since April and the downtrend continues as demand continues to move away from the highs seen last year, severely tested by the uncertain outlook and high inflation environment, “explained Phil Smith. associate director at S&P Global Market Intelligence.
“Another strong inventory increase in July pushes producers to reduce purchasing activity for the first time in two years. The potential shortage of gas supplies seriously worries producers for the next year, so expectations have turned negative since March and are getting worse every month, ”he added.

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