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10 Feb 2016
Italy: Disappointing data adds downwards bias to 4Q15 GDP - ING
Paolo Pizzoli, Research Analyst at ING, notes that the December industrial production data released by Istat cast doubts on the strength of the Italian economic recovery.
Key Quotes
“According to Istat, the Italian Industrial production was down 0.7% MoM in SA terms (-1.0% YoY in calendar adjusted terms), in stark contrast with a 0.3% consensus expectation.
Looking into the broad aggregate breakdown, the contraction was broad based, with intermediate goods down 1.8% MoM, investment goods down 1.3% MoM, energy down 0.8%. The sole exception was the production of consumer goods, up 0.8% on the month.
Sector wise, data confirms the vulnerability of the manufacturing recovery, excessively polarised, all over 2015, on transport equipment. Sectors linked to the construction chain, which had given signs of life over the Fall, also contracted, adding to the monthly gloom.
The disappointing reading of December industrial production is a bit puzzling, as it conflicts with the signals coming from survey data and order books. Still, it cannot be dismissed as scarcely relevant. Indeed, it supplied the last bit of hard data for December was the last piece of hard data evidence before the publication of the preliminary estimate of 4Q15 GDP, due this Friday.
We now know that in 4Q15 the Italian industrial production contracted by 0.1% in 4Q15 (+0.3% in 3Q15), which suggests that the supply side of the equation might not have provided any positive contribution to quarterly GDP growth. While the usual battery of high frequency confidence indicators such as the Commission’s ESI and the PMIs would point to quarterly GDP growth to the tune of 0.3% in 4Q15, today’s production data add a heavy downside bias, leaving the onus of positive surprises to the demand side.”
Key Quotes
“According to Istat, the Italian Industrial production was down 0.7% MoM in SA terms (-1.0% YoY in calendar adjusted terms), in stark contrast with a 0.3% consensus expectation.
Looking into the broad aggregate breakdown, the contraction was broad based, with intermediate goods down 1.8% MoM, investment goods down 1.3% MoM, energy down 0.8%. The sole exception was the production of consumer goods, up 0.8% on the month.
Sector wise, data confirms the vulnerability of the manufacturing recovery, excessively polarised, all over 2015, on transport equipment. Sectors linked to the construction chain, which had given signs of life over the Fall, also contracted, adding to the monthly gloom.
The disappointing reading of December industrial production is a bit puzzling, as it conflicts with the signals coming from survey data and order books. Still, it cannot be dismissed as scarcely relevant. Indeed, it supplied the last bit of hard data for December was the last piece of hard data evidence before the publication of the preliminary estimate of 4Q15 GDP, due this Friday.
We now know that in 4Q15 the Italian industrial production contracted by 0.1% in 4Q15 (+0.3% in 3Q15), which suggests that the supply side of the equation might not have provided any positive contribution to quarterly GDP growth. While the usual battery of high frequency confidence indicators such as the Commission’s ESI and the PMIs would point to quarterly GDP growth to the tune of 0.3% in 4Q15, today’s production data add a heavy downside bias, leaving the onus of positive surprises to the demand side.”