Italy Manufacturing and Services PMI February 2008

The February reading on the RBS/NTC Eurozone Manufacturing PMI - Purchasing Managers' Index - (a composite indicator designed to provide a single-figure summary of business conditions across the eurozone) registered 52.3 . The PMI was in line with the earlier flash reading and down from 52.8 in January, signalling a slight weakening in the rate of expansion to the second weakest level registered in the past two-and-a-half years. PMI readings among the big-four euro nations showed the widest variation for seven-and-a-half years, with continued solid growth in Germany and, to a lesser extent, France contrasting with near-stagnation in Italy and an accelerating rate of contraction in Spain. The PMI for Italy hit a two-and-a-half year low while Spain saw the sharpest rate of contraction since December 2001.

Italian manufacturing growth slowed in February, as orders fell for the second month running and exports stagnated, and the NTC/ADACI Index came in at 50.6, down from January's 50.8.



Export orders -- which had been relatively buoyant and offsetting low domestic demand -- stagnated for the first time since May 2005, reflecting the effect of a strong euro and reduced demand for Italian consumer goods in foreign markets. In February the overall new orders sub-index remained at 49.4 and output growth slowed to 51.3 from 51.8, with output of consumer goods contracting. The survey also had evidence that manufacturers themselves were preparing for a sustained slowdown. The employment sub-index fell into negative territory (49.2) for the first time since last September, indicating companies were tightening their belts. Business confidence hit a 28-month low in February, according to economic think tank ISAE, with consumer goods makers particularly gloomy amid falling orders.

Italy's service sector contracted in February at its fastest pace for more than a decade, as new orders languished and outstanding business fell away sharply, according to NTC/ADACI Services PMI. The 47.2 reading was well below the 50 mark separating expansion from contraction, and marked the third consecutive month of declining activity and the worst reading in the survey's 10-year history.

"A record fall in business activity was underpinned by a lack of new orders, reflective of low levels of demand," according to the NTC report. Fewer new orders meant backlogs of work were cleared for the seventh consecutive month in growing evidence of spare capacity in the sector.