Italy's manufacturing shrinks at steepest rate since COVID lockdowns

ROME, July 3 (Reuters) - Italys manufacturing sector contracted in June at the steepest rate in over three years, a survey showed on Monday, signalling a recession ahead unless buoyant services can prop up the euro zones third largest economy.

The HCOB Global Purchasing Managers Index (PMI) for Italian manufacturing came in at 43.8, down from 45.9 in May and well below the 50 mark that separates growth from contraction for a third consecutive month.

\“The recession in Italian industry ... seems to be deepening,\” said HCOB economist Tariq Kamal Chaudhry.

The reading missed the median forecast of 45.4 in a Reuters survey of analysts and was the lowest since April 2020, when Italian industry was shuttered by lockdowns at the height of the first wave of the COVID-19 pandemic.

The manufacturing output sub-index plunged to 42.7 from Mays 46.4, while the new orders indicator dropped to 40.1 from 44.3.

The Italian economy has been giving extremely mixed signals in recent months, with the industry and especially the manufacturing sectors struggling badly, but services and employment growing amid a boom in tourist arrivals.

The services PMI, to be released on Wednesday, is expected to show the sector slowing in June but still registering some growth, according to Reuters survey.

Industrial output tumbled 1.9% in April from the month before, the fourth consecutive monthly decline, data from national statistics bureau ISTAT showed last month.

Gross domestic product rose 0.6% in the first quarter from the previous three months, rebounding from a 0.1% drop at the end of 2022.

The government is officially forecasting GDP growth of 1.0% this year, slowing compared with last years rate of 3.7%.