Italy’s factories outperform most European peers on supply shock

Italy’s manufacturing sector saw more rapid expansion last month, bucking the general weakening trend in the region as Prime Minister Mario Draghi tries to spur growth in the euro area’s third-largest economy.

The Netherlands, Ireland and Greece also recorded stronger performances in surveys of purchasing managers by IHS Markit. With Germany, France and Spain lagging behind, momentum in the entire euro area slowed in October.

Purchasing managers blamed global supply bottlenecks for interrupted production schedules and dented order books as well as steeply rising prices. Euro-area inflation breached 4% in October, though is projected to slow in 2022.

Having already expanded more strongly than expected in the third quarter, Italy’s economy is now on track to grow more than 6% this year, data released Friday showed. German output, meanwhile, slowed from the previous three months, due to shortages of components and raw materials.

Italy, which is benefiting from large fiscal stimulus and a loosening of coronavirus curbs, could soon face similar obstacles, according to Lewis Cooper, an economist at IHS Markit.

“With demand for inputs rising across the globe, we could see supply constraints have a more significant impact on the performance of Italy’s manufacturing sector before the end of the year,” he said in a statement.