Italy’s factory activity contracts at fastest rate for 11 years: PMI

(C) Reuters. A worker welds in a factory in Gravellona Lomellina

ROME (Reuters) – Italian manufacturing activity plunged in March at the steepest rate for 11 years, hit by a lockdown imposed by the government to try to contain the country’s coronavirus outbreak.

The IHS Markit Purchasing Managers’ Index (PMI) dropped to 40.3 in March from 48.7 in February.

The latest figure was the lowest since April 2009, during the global financial crisis. It was far below the 50 mark that separates growth from contraction, pointing to a deep manufacturing recession.

The data was broadly in line with expectations after grim PMI surveys in other European countries published last week. A Reuters poll of eight analysts had pointed to a reading of 40.5.

IHS Markit said its sub-index for output at manufacturers dived to 27.8 from 46.9, the lowest reading since the series began in June 1997. The new orders index also plummeted.

The euro zone’s third-largest economy was already teetering near recession before the coronavirus hit, with gross domestic product declining by 0.3% in the fourth quarter of last year from the previous three months.

With all businesses closed bar those deemed essential to the country’s supply chain, and draconian restrictions on people’s freedom of movement, economists forecast a steep GDP decline this year.

Forecasts range widely, with Italian employers’ lobby Confindustria forecasting a 6% annual contraction, and investment bank Goldman Sachs (NYSE:GS) estimating -11.6%.

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