MILAN, May 2 - Italy's manufacturing sector contracted for the first time in 15 months in April as the war in Iraq put off new clients and the strengthening of the euro hurt exports, a survey showed on Friday. The /ADACI Purchasing Manager's Index for Europe's number four economy came in at a seasonally-adjusted 49.0, its lowest level since December 2001 and down from March's reading of 50.0 -- the mark that divides contraction from expansion. The survey was conducted in mid-April, after U.S.-led forces took control of Baghdad on April 9, ending Saddam Hussein's 24-year reign over Iraq. Manufacturers widely reported that economic uncertainty triggered by the Iraq conflict resulted in the cancellation or postponement of many contracts. Italy last week more than halved its forecast for economic growth, confirming economists' fears that the outlook is less than rosy for the euro zone's number three economy.
Italy slashed its 2003 target to 1.1 percent -- in line with IMF forecasts -- from a previous 2.3 percent forecast as a weak global economy worsened by war in Iraq took its toll. The PMI index reflected the global tensions with exports giving a reading of 47.0 -- the sharpest shrinkage since December 2001 -- hit by the war and a stronger euro, which makes euro zone exports more expensive abroad. Total new orders also contracted for the first time since the end of 2001, touching 48.2. The manufacturing sector employment index came in at 48.8, against March's 48.9 but the rate of job shedding was slower than that seen in the period from August 2002 to February. Input prices paid by firms rose for a 14th straight month in April but the rate of inflation eased slightly -- falling to 56.3 from 57.5 -- helped by a decline in oil prices.//