Italy: Manufacturing soft patch continued in September – ING

Paolo Pizzoli, senior economist at ING, notes that Italy’s seasonally-adjusted industrial production contracted by 0.4% month-on-month (+0.4% in August), slightly better than consensus.

Key Quotes

“Averaging the July-September monthly numbers, we iron out possible distortions to monthly releases related to August closures. Over 3Q19, industrial production contracted by 0.5% quarter-on-quarter, following a 0.8% decline in 2Q19. The year-on-year measure, adjusted for working days, edged lower to -2.1% in September (from -1.8% in August), confirming that the trend in industry remains firmly in contraction.”

“A brief look at the big aggregate decomposition shows that the SA monthly decline was driven by  energy and intermediate goods, only partially compensated by increases in consumption and investment goods.”

“Today’s data confirms that the manufacturing recession continued over the summer, which mirrors the concurrent PMI readings hovering at six-year lows. Tentative high frequency evidence for 3Q19 is suggesting that an industrial turnaround is not imminent.”

“Our tentative call remains that this will allow Italian GDP to post flat growth in 4Q19, which would bring average 2019 GDP growth to 0.2%.”