The Italian industry continues to grow, but enters the third quarter with less momentum. In July the HCOB PMI manufacturing index fell to 51.3 points from 52.2 in June, remaining above the 50 point threshold that separates expansion and contraction. The figure, however, is lower than expected and hides less reassuring signs: production increases more slowly, new orders decrease again and companies simultaneously reduce employment and purchases for the first time in 2026.
The comparison with the Eurozone makes the Italian slowdown more evident. The euro area manufacturing PMI rose to 51.9 points from 51.4, just below the preliminary estimate of 52. The production index reached 52.9, the highest level since March 2022. However, the European recovery remains fragile: growth is supported above all by the clearance of backlogs of orders, while new demand barely advances and orders from abroad continue to decline.
What does the PMI at 51.3 mean for Italy
The Purchasing Managers’ Index is constructed through the responses of purchasing managers of manufacturing companies. It is considered a leading indicator because it quickly intercepts changes in production, orders, employment, inventories and delivery times, before official data on industry and GDP arrive.
A value above 50 does not mean that the sector is growing by 51.3%, but that the weighted majority of companies report an improvement compared to the previous month. Italy therefore remains in expansion, but the passage from 52.2 to 51.3 indicates that the pace has weakened.
The sub-indexes show a more cautious picture. New orders fell for the first time in three months in July as support from advance purchases and inventory replenishment faded. Companies have responded by reducing staff and quantities purchased, a sign that they do not expect demand to be robust enough to justify an increase in production capacity.
The Eurozone is growing more, but demand remains weak
In the Eurozone, manufacturing production recorded its fastest pace of growth in almost four and a half years. It is the most encouraging data from the July survey, but it does not yet equate to a solid recovery.
Orders increased only marginally and much less than production. Numerous factories worked above all to complete orders accumulated in the previous months. Backlogs of orders fell at the sharpest pace since January, while inquiries from abroad fell further, with declines also in Italy, France, Spain and Austria.
The production push could, therefore, lose strength when the backlogs have been cleared, if no new customers arrive in the meantime. Industrial employment in the euro area also decreased again, confirming companies’ caution regarding the prospects for the coming months.
Germany accelerating, France contracting
European photography remains uneven. Germany recorded a manufacturing PMI of 52.2 points, up from 50.3 in June, matching the highest pace of growth since May 2022. German production increased at the fastest pace since February 2022 and foreign orders showed their best performance in four and a half years.
France, on the contrary, has returned below 50, with a new contraction in production and orders. Italy is therefore placed in an intermediate position: it continues to grow, but is losing ground compared to Germany and is already showing a decrease in demand.
For a production system strongly linked to European supply chains, the German recovery can translate into more orders for Italian companies that supply components, machinery and intermediate goods. The benefit will depend, however, on the ability of foreign demand to consolidate.
What changes for businesses and workers
For businesses the message is twofold. The expansionary phase has not stopped, but the decline in orders calls for caution. Companies may postpone new hiring, warehouse expansions and investments until more stable demand emerges.
The reduction in employment captured by the PMI does not automatically equate to an immediate increase in national unemployment. It indicates, however, that in manufacturing the non-renewal of some positions, the limited replacement of those leaving the company and greater attention to cost containment are prevailing.
For families and businesses, the price signal also matters. In Italy, inflationary pressures have eased. In the eurozone, growth in input costs fell to a five-month low and prices charged by factories rose at the weakest pace since March. However, risks related to energy and tensions on supply chains remain.
The ECB will have to understand whether the acceleration in production is here to stay or represents a rebound fueled by backlogs of orders.
The recovery is there, but Italy cannot celebrate yet
Italian manufacturing remains above 50, but is losing speed and sees orders worsen. The Eurozone accelerates thanks above all to Germany, while France remains in difficulty.
Italy continues to produce more, but to transform the improvement into stable growth, new orders, stronger exports and investments are needed.
Without these elements, the slowdown in July risks anticipating a more cautious autumn for businesses and workers. The European data, however, offers an opportunity: if the German recovery manages to consolidate and involve the continental supply chains, Italian manufacturing could also regain momentum in the coming months.
