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Italian factory output sees 1st growth in 19 months

Published 11/02/2009, 03:45 AM
Updated 11/02/2009, 03:48 AM

By Daniel Flynn

ROME, Nov 2 (Reuters) - Italy's manufacturing output rose for the first time in 19 months in October, but activity in the sector as a whole remained weak as unemployment continued to rise, data showed on Monday.

The Markit/ADACI Purchasing Managers' Index -- which groups a range of measures in Italy's manufacturing sector including output, prices, employment and stocks -- rose to 49.2 in October from 47.6 the previous month.

That was at the top end of the range of a Reuters poll of 14 analysts, which predicted on average an increase to 48.6.

While the overall PMI index remained below the 50 mark which separates growth from contraction -- where it has been since February 2008 -- the crucial output sub-index rose to 51.8, showing the first rise in manufacturing production since March 2008.

"Italian manufacturers reported that their recession which has spanned 18 months finally ended in October, two months behind the euro zone as a whole," said Andrew Self, economist at Markit.

The sub-index for new orders also crept marginally above the 50 threshold, reaching its highest levels since December 2007. The rise was driven by domestic orders, while foreign demand for Italian goods fell for a 21st straight month.

While new orders for consumer goods dipped, orders for investment goods rose strongly, at their fastest rate in three years.

Italy's 1.5 trillion euro economy -- about a fifth of which is manufacturing -- is expected to emerge from its worst post-war recession before the end of the year, slower than partners France and Germany which showed positive growth in the second quarter.

However, several areas of concern remained for Italy's manufacturing sector, Self noted.

"New contracts were often won only by fierce price discounting, which led to ongoing widespread job losses, which in turn suggests that consumer spending is likely to remain subdued for some time to come."

Unemployment continued to rise, though less steeply than in the first half of the year. It was the 21st straight month of reduction in employment levels, with 15 percent of firms cutting workers and only 5 percent hiring.

Output prices fell for a 13th consecutive month, with most respondents citing tough competition for market share and some saying the strength of the euro against other world currencies had forced them to cut their prices.

Input prices, however, rose for a second month, due to a rise in the cost of raw materials, especially oil.

(Editing by Stephen Nisbet)

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