Italian manufacturing contraction softens in July, PMI shows

ROME (Reuters) -The Italian manufacturing sector contracted for a 16th consecutive month in July but at a considerably slower rate than the month before, showing tentative signs of stabilisation, a survey showed on Friday.

The HCOB Italy Manufacturing Purchasing Managers' Index (PMI) stood at 49.8 in July versus 48.4 in June, marking the highest reading since March 2024 while remaining below the 50 threshold that separates growth from contraction.

The sub-indexes for new orders and output each came in just below the 50 mark, at 49.5 and 49.0 respectively, with both pointing to a far slower rate of contraction than the month before.

"Overall, July's data suggest that Italy's manufacturing sector may be approaching a turning point. The recent EU–US trade agreement has prevented a sharp escalation in tensions and provides a welcome dose of planning certainty for Italian exporters," said Nils Muller, junior economist at Hamburg Commercial Bank AG.

Manufacturing sector employment declined for the tenth consecutive month and at a steeper rate than in June, according to the survey, with the subindex falling to 48.4 in July from June's 49.5.

The most recent official industrial output data in the euro zone's third-largest economy showed an unexpected fall in May in a renewed sign of weakness after a surprise rise in April.    

The Italian economy unexpectedly shrank by 0.1% in the second quarter from the previous three months, after the government in April halved its 2025 growth estimate to 0.6% amid mounting uncertainty due to U.S. tariffs.

(Reporting by Antonella Cinelli; Editing by Toby Chopra)