Italy's Manufacturing Growth Steady At 6-1/2 Year High

Jon Howard
October 3, 2017

The manufacturing PMI consists of five sub-indices, with new orders having the biggest weight at 30%, followed by output (25%), employment (20%), suppliers' delivery times (15%) and stocks of purchases (10%). That compares with a preliminary reading of 58.2 and is the highest level in more than six and a half years. Sales have increased to Europe, China, the USA and South America.

Where an increase in output was registered, this was mainly due to rising intakes of new business.

Manufacturers responded to capacity pressures by adding to their workforce numbers at a rate that was close to May's near survey record increase.

This combined with a report from law firm Baker McKenzie suggesting that Britain's manufacturers could lose up to £17bn a year in the event of a "hard Brexit" has led to investors fleeing the Pound at the start of the week.

"This will depend on factors such as actual fulfilment and value of orders, as well as cost pressures faced by businesses".

"This is also happening alongside rising commodities prices, which are contributing to inflationary pressures across the supply chain".

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The Australian Dollar Pound (AUD GBP) exchange rate advanced at the start of this week's session as Sterling was undermined by a weak Manufacturing PMI.

Atul Kariya, manufacturing sector head at accountancy firm MHA MacIntyre Hudson, said: "While it is great to see continued growth in the United Kingdom manufacturing sector, it is likely that these inflationary pressures will go up again, with the potential to cut into profitability and production". Will they be able to absorb these rising costs, or will they need to be passed on to the end user?

The survey mentioned that the increasing costs of raw materials affected the production plans of firms.

This is while a Thursday speech from European Central Bank chief Mario Draghi and Friday's monthly United States nonfarm payrolls number will also influence Sterling pairs from the opposite direction.

The PMI rose to a seasonally adjusted 55.0 last month from 54.6 in August. Also positively, job creation increased again, but we are continually hearing that the shortage of skills is holding the sector back.

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