Italy: Soft industrial production casts shadows over 3Q18 growth - ING

Paolo Pizzoli, Senior Economist at ING, notes that in July, the seasonally adjusted industrial production of Italian economy contracted 1.8% month on month (from a downwards revised +0.3% in June), doing much worse than expected.

Key Quotes

“The annual working days adjusted measure, better suited to monitor the trend in production, was even worse, signalling a 1.3% YoY contraction (from +1.4% YoY in June), the worst reading since January 2015.”

“A quick look at seasonally adjusted broad aggregates shows that softness was broad-based, affecting the production of investment goods (-2.2% MoM), consumer goods (-1.7% MoM), intermediate goods (-1.2% MoM) and energy (-0.8%).”

“August manufacturing PMI came in very soft at 50.1, very close to the contraction territory, which casts some shadows for 3Q18 growth.”

“On past norm, the July-August composite  PMI reading would be compatible with a 0.1/0.2% quarterly GDP expansion in 3Q.”

“Today’s release shifts the balance of risks towards 0.1%, which would be still compatible with our average yearly GDP growth forecast of 1.1% for the whole of 2018.”

“More food for thought for Italian political actors currently negotiating the content of the next budget.”

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