Key Takeaways
- Italy’s manufacturing sector contracted sharply in December 2025, with the HCOB PMI falling to 47.9 from 50.6 in November.
- Output and new orders declined at their fastest rates in nine months, ending a brief expansion phase.
- The contraction highlights ongoing sector weakness amid government forecasts of 0.7% economic growth for 2026.
Italy’s manufacturing industry slipped back into contraction in December 2025, according to the HCOB Purchasing Managers’ Index (PMI) released on January 2. The PMI dropped sharply to 47.9 from 50.6 the previous month, falling below the expansion threshold of 50. This decline signals renewed weakness, driven by the steepest decreases in output and new orders since March, complicating Italy’s broader economic growth outlook for 2026.
Manufacturing Output and Orders Lead Steep Contraction
The latest HCOB PMI report showed Italy’s manufacturing sector facing deteriorating conditions in December. Production contracted significantly, with the output subindex sliding to 46.8 from 50.3 in November. Meanwhile, the new orders index plunged to 47.0, marking its fastest decline since March and a sharp reversal from 51.6 the prior month. Economist Nils Muller of Hamburg Commercial Bank described the data as “the steepest deterioration in operating conditions since March,” underlining the abrupt end to a brief growth spurt experienced in November.
This weakness follows recent industrial data published by Italy’s statistics bureau ISTAT, which recorded a 1% drop in industrial output in October compared with the previous month. Such trends underscore the manufacturing sector’s struggle to provide momentum for Italy’s overall economic growth in the near term.
Government Growth Projections Amid Manufacturing Challenges
Despite the sector’s downturn, Prime Minister Giorgia Meloni’s government remains cautiously positive about the country’s economic trajectory. Official forecasts anticipate 0.7% GDP growth in 2026, improving on the estimated 0.5% expansion recorded in 2025. However, the sharp declines in output and new orders raise concerns about manufacturing’s capacity to support this projected growth.
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The decline in manufacturing activity points not only to weak domestic demand but also to external pressures such as export challenges and supply chain disruptions, which are critical factors for Italy’s industrial base. Market participants are expected to monitor upcoming economic indicators and government policy initiatives closely to evaluate whether this contraction represents a short-term setback or hints at deeper structural issues.
Growth: Market Outlook
The HCOB PMI’s revelation of Italy’s manufacturing contraction—the fastest since March—marks a significant hurdle for sector recovery. With output and new orders falling steeply, sector performance is casting a shadow over the country’s growth prospects, despite optimistic government targets for 2026. Investors and analysts will be watching for further data to determine if Italy’s manufacturing struggles portend wider economic headwinds or if stimulus measures can reverse the trend.
