Italy Manufacturing Sector Remains in Contraction

The HCOB Italy Manufacturing PMI rose slightly to 48.1 in January 2026 from 47.9 in December, in line with market expectations. Demand conditions were still weak, with new orders and exports falling again, though at a milder pace, reflecting fragile markets and some order cancellations. Production also declined modestly, limited by subdued demand and, in some cases, raw material constraints. Lower output led firms to cut purchases and reduce inventories, helping ease pressure on supply chains and shorten delivery times. Despite softer input demand, costs jumped at the fastest pace in over three years due to higher raw material prices, prompting manufacturers to raise selling prices. Employment was the only area of growth, with firms adding staff cautiously. Looking ahead, manufacturers were more optimistic, with confidence near a four and a half year high on hopes of new products, lower borrowing costs and a gradual sector recovery.

The HCOB Italy Manufacturing PMI fell to 47.9 in December 2025, down from 50.6 in November and below the 50.0 forecast. The decline marked the steepest downturn since March, led by consumer goods producers, while other segments experienced only mild contractions. New orders fell after a month of growth, weighed down by heightened uncertainty and sector-specific challenges, particularly in steel and autos. Output declined at the fastest pace in nine months, and employment continued to fall, marking a full quarter of job reductions. On the price front, input cost inflation eased from November’s three-year high, prompting manufacturers to modestly lower their selling prices. Despite the slowdown, sentiment improved slightly, supported by investment in product launches and plans to expand into new markets.

The HCOB Italy Manufacturing PMI rose to 50.6 in November 2025, up from 49.9 in October and above the 50.3 forecast, marking the first expansion in three months and the strongest since March 2023. The improvement was driven by a revival in total new orders, which recorded the fastest growth in over three-and-a-half years, supported by higher domestic and export demand. Exports rose for the first time in six months, with the growth rate the highest in 45 months. Production volumes, however, rose at a softer and only slight pace in November, prompting firms to continue making reductions to their workforce and purchasing activity. Supply chain conditions remained strained, with delivery times lengthening moderately. Cost pressures intensified sharply, with input prices rising at the fastest pace in three years, although selling prices rose more moderately due to competitive pressures. Firms remained optimistic for the year ahead, with sentiment easing from October but still above trend.