Italian industrial production sees a year-end rebound

After contracting an upwardly revised 1.3% in November, the Italian seasonally adjusted industrial production rebounded by 1.1% month-on-month in December, marginally beating expectations. In 2023, the average production contracted 2.5% from 2022.

In December, all big industry groupings apart from energy posted positive gains. The production of consumer goods was the fastest growing, with both durable and non-durable goods up some 3% on the month, followed by investment goods at +1.8% and intermediate goods at +0.8%.

The sector breakdown shows that something might start changing as far as energy-intensive sectors are concerned. Those most affected over 2023 by high costs of energy, such as chemicals, metal products and paper, posted a monthly rebound in December. This suggests that the downward adjustment of energy prices might start to see some supply-side effects.

Looking ahead, business surveys are pointing to a slow turnaround in expected orders (not yet in expected production), possibly reflecting an ongoing de-stocking of finished goods. The delayed delivery of imports from the Far East due to the Red Sea and Suez Canal disruptions might play a part in the process. In a weak demand environment, production looks set to remain capped over the first quarter of this year – but the picture could gradually improve from the second quarter if inflation remains well-behaved and the expected improvement in orders indeed materialises.

Today’s data still seems to fit with our view of a modest 0.1% quarterly GDP growth over the first quarter of 2024. As a result of the higher statistical carryover of the fourth quarter’s positive GDP surprise, we have marginally adjusted our average GDP forecast for 2024 up to 0.5%.