FX.co ★ Italy Manufacturing Sector Remains in Contraction

The HCOB Italy Manufacturing PMI edged up to 48.1 in January 2026 from 47.9 in December, in line with market forecasts. The demand remained tepid as both new orders and exports experienced declines, albeit at a slower rate, indicating fragile market conditions and some order cancellations. Production saw a slight decrease due to subdued demand and, at times, raw material shortages. The reduction in output prompted firms to cut back on purchases and lower inventory levels, thus alleviating supply chain pressures and shortening delivery times. Despite the softness in input demand, costs surged at the most rapid rate in over three years, driven by increased raw material prices. This forced manufacturers to hike their selling prices. Employment was the sole area of growth, with companies cautiously increasing their workforce. Looking forward, manufacturers expressed increased optimism, with confidence reaching a near four-and-a-half-year high, fueled by hopes of new product developments, lower borrowing costs, and a gradual recovery in the sector.