How is industrial production in Italy going?

How is industrial production in Italy going?

The analysis by Paolo Mameli, senior economist of Intesa Sanpaolo's studies and research department, on the industrial production figure in August

Industrial production fell by -0.2% m / m in August, after the 1% m / m growth in July (revised upwards from 0.8% m / m in the first estimate), and after the 1.1% m / m in June. The annual change, corrected for calendar effects, fell to zero from 7.2% the previous month. During the month, the decline concerned energy, consumer goods and intermediate goods (-2.1%, -2% and -1.3% m / m, respectively), while an increase was recorded for capital goods (+ 0.8% m / m). Capital goods, together with intermediate goods, are the only macro-categories in progress on an annual basis.

Production in the manufacturing sector alone fell by just -0.1% m / m in the month, and maintains a growth trend on an annual basis (+ 1.7%). However, the detail by sector is very varied: on a trend basis (corrected for calendar effects) there are very significant increases for the metallurgical sector (+ 16.6%), for mechanics (+ 10.3%) and for electrical equipment (+ 6.3%), while, on the contrary, very marked decreases were recorded for means of transport (-23.7%), pharmaceutical products (-20.9%) and, outside the manufacturing, mining activities (-17.7%).

Even after the slight decline in August, industrial production remains above pre-Covid levels (+ 1.5% compared to February 2020). The increase is mainly due to intermediate goods (+ 4.6%), against a substantial stability for capital goods and a decrease for consumer goods and energy (-3.7% and -6%, respectively) . Industrial output is on course for another increase in the third quarter, of the order of 1% qoq (in case of stability in September), after 1.2% in the spring quarter and 1.5 % of the first three months of the year. However, we expect a further and more significant slowdown in the current quarter, in which production activity in industry is likely to be little changed compared to the previous three months. Business confidence surveys confirm that the manufacturing sector remains in an expansionary phase, even if a moderate deceleration is noted compared to the rhythms of the first part of the year.

The difficulties in procuring materials, and the increase in the prices of raw materials, seem in recent months to have acquired greater importance as an obstacle to production, even if this factor seems to be less crucial in Italy than what is being observed for example in Germany (where industrial production fell by -4% mom in the same month); in general, Italian industry is showing a more lively rebound, in the post-pandemic phase, compared to the other three major economies of the euro area. Looking ahead, in our opinion, a trend of slowdown in economic activity in industry has begun, after the peaks reached in the first half of the year, given that there are no signs of improvement in terms of supply-side bottlenecks, which they could persist throughout the first half of next year.

However, the baton of growth has now passed from industry to services, the liveliness of which may compensate for the lower dynamism of the industry in the coming months. In fact, for services, the recovery margins after the dramatic effects of the pandemic remain substantial (the value added in the 2nd quarter of 2021 remained 5% lower than the levels at the end of 2019 for all services, 9.4% for trade. , transport, accommodation and catering, and 14.4% for other service activities). In summary, we confirm the view that the risks to the growth scenario are currently upwards. Our current official forecast for 2021 GDP (5.7%) is becoming rather cautious, and we would not be surprised if at the end of the year the balance shows a rebound equal to or even more than 6%. The expansion is expected to continue, albeit at a less lively pace, in 2022 (our estimate: 4%).

This is a machine translation from Italian language of a post published on Start Magazine at the URL on Tue, 12 Oct 2021 06:53:52 +0000.