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PATRIS - MACRO - The November Markit PMI suggests that industrial output will remain weak in 4Q18. In Italy, the PMI declined to the lowest level since December 2014

3 Dec 2018

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Bottom-Line: The final reading for the Markit manufacturing PMI was revised upwardly by 0.3 points to 51.8, which brings the change in November to a modest 0.2 points decline. This is still the lowest reading since August 2016. The October/November average stands at 51.9, after 54.3 in 3Q18. Industrial output is likely to remain weak in 4Q18. However, the US-China deal may help the survey over coming months, by supporting its forward-looking components.

The euro area’s big-four economies posted the lowest manufacturing PMI readings of all countries covered by the survey. Italy recorded a second successive month in contractionary territory, registering its lowest PMI reading in nearly 4 years.

New orders showed a second successive monthly deterioration (although modest). Export trade was reported to have declined for the second month running. Faltering demand was in part linked to challenging conditions in the autos industry. Output charge inflation for the euro area remained at an above average rate, despite being the slowest recorded for 15 months. Sentiment about future output was little changed and remained close to October’s near six-year low.

Details:

Spain: The Markit manufacturing PMI rose by 0.8 points to 52.6 in November (vs. consensus 51.5), the strongest reading for three months. The October/November average stands at 52.2, slightly below the 3Q18 average (52.4).

The details of the survey showed improved gains in both output and new orders, reflecting stronger demand, both domestic and foreign sales (despite reports of lower demand from the US and subdued sales from auto producers). Confidence about the future eased to the lowest level since June 2013 amid worries over global autos production and demand. Margins remained under some pressure, as output charges rose at a slower rate than input prices.

Italy: The Markit/ADACI manufacturing PMI feel deeper in contractionary territory in November, after posting a 0.6-points decline to 48.6 (vs. consensus 48.9). This is the lowest reading since December 2014. The October/November average stands at 48.9, which suggests that the indicator could see a quarter with a reading below 50 for the first time since 4Q14.

The details showed marked falls in output (the lowest reading in 67 months) and new orders (both in contractionary territory for the fourth month in a row), with reports of a decrease in customer demand, namely for automobiles. Export sales declined for the second consecutive month amid reports of weaker external demand. Confidence towards the 12-month outlook fell to the lowest level since early 2013. Input inflation moderated to a 16-month low.

Other countries: Manufacturing PMI in Germany was revised slightly higher from 51.6 to 51.8 (the October/November average stands at 52.0, after 55.0 in 3Q18). In France, the manufacturing PMI increased from 50.7 to 50.8 (October/November average at 51.0, after 53.1 in 3Q18). Elsewhere, the manufacturing PMI increased in Greece (+0.9 points to 54.0), Ireland (+0.5 points to 55.4), Austria (+1.1 points to 54.9) and fell in the Netherlands (-1 point to 56.1).

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