Italian Private-Sector Growth Returns With More Stimulus Due

(Bloomberg) -- Italy's private-sector economy returned to growth in February after four months of contraction, with the prospect of more fiscal support underpinning confidence in the recovery.

IHS Markit's index of manufacturing and services activity rose to 51.4 last month, with a “rapid” improvement at factories and a slower pace of decline in the service sector.

The reading is higher than preliminary measures for Germany, France and the 19-nation euro zone. The comparable euro-area figure was 48.8, a two-month high but below the 50 that divides expansion from contraction.

Italy has spent more than 130 billion euros so far to bolster an economy that shrank nearly 9% last year, and Prime Minister Mario Draghi's government may soon seek parliamentary approval for yet more stimulus.

While the country tightened coronavirus restrictions this week in several regions including the Milan area, an important business center, confidence in the outlook for the next 12 months rose to a record high in February.

Purchasing managers said orders rose at the fastest pace in nearly 2 1/2 years, and were broad-based across manufacturing and services. Businesses expanded their workforces for the first time in a year.

“The latest data are welcome news and point to a fresh recovery of the Italian economy and once lockdown measures are loosened, we should see strong growth as lost ground begins to be recaptured,” said Lewis Cooper, an economist at IHS Markit. “Nonetheless, the weak performance of the service sector remains a concern, as should the further building of cost pressures.”

The pickup in global demand, combined with virus restrictions, is leading to delivery delays and higher prices. In Italy, cost burdens increased at the steepest pace since mid-2018.

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