Italy's factory PMI slipped to 52.2 as stockpiling boost fades. Purchasing activity fell, cost pressures eased. Final composite PMIs and ECB July meeting are next.
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Italy's manufacturing sector slowed in June, with the HCOB PMI falling to 52.2 from May's 27-month high of 52.4. The print came in just below the 52.4 consensus estimate.
The headline still points to expansion. The internal details show the composition of growth shifting. S&P Global Market Intelligence economist Eleanor Dennison said the June data provides evidence that a temporary stockpiling boost is "starting to wear off."
Manufacturers lowered their own purchasing quantities in response to slower output growth and rising input inventories. Dennison noted that the decline in purchasing comes amid a fresh rise in input stocks. The index averaged 52.0 in the second quarter, up from 50.0 in the first quarter. The trajectory within the quarter matters more than the average.
War effects in the Middle East continue to appear in price data and delivery times. Dennison said the latest figures offer "the first signs that things are moving in the right direction." Cost and charge inflation both slowed to their softest since March, just after the outbreak of the conflict. The deterioration in supply chain performance was the least pronounced over that same period.
Firms turned more optimistic about the 12-month outlook. Dennison said the improved sentiment is conditional. Companies are "counting on an improvement in the business environment" to sustain the positive view.
For currency traders, the PMI is a secondary data point compared with services prints. The inventory de-stocking dynamic carries more weight. Italy's manufacturing sector saw a brief lift from precautionary stockpiling through late spring. The orders sub-index fell in June. If inventory normalization continues alongside a further weakening in orders, the headline PMI could slip toward 50 over the summer. That would narrow the growth differential between Italy and the broader euro area at the margin. It removes a modest tailwind for the euro against the dollar on relative-growth factor trades.
The next data check is final composite PMIs across the euro area due later this week. The ECB's July meeting follows on July 27. The June HICP print will set expectations for whether a September cut remains in play.
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