Italy Industry Output Stagnates

Italian industrial output was weaker than expected in November, coming in unchanged from the month before and casting some doubt over growth prospects as the country heads for a March election.

The flat reading in November followed a 0.6% increase in October (marginally revised up from 0.5%) and a 1.4% drop in September, national statistics bureau ISTAT reported on Friday, Reuters reported.

The stagnant November figure was well below market expectations of a 0.6% rise, based on a Reuters’ survey of 15 analysts. In the three months to November, output was down 0.2% compared with the June-to-August period, ISTAT reported.

The data will be a disappointment for the ruling Democratic Party, which has been slipping in opinion polls and needs good economic news ahead of parliamentary elections on March 4.

Italian industrial output often shows a correlation with trends in gross domestic product, which rose 0.4% in the third quarter of last year, slowing from a 0.5% increase in the second.

Industrial output fell by around a quarter between 2008 and 2014, and has recovered only a small part of that during the last two years.

The government of Prime Minister Paolo Gentiloni forecasts that GDP grew 1.5% last year, which would be Italy’s strongest rate since 2010 but would still leave it in its customary position among the most sluggish economies in the eurozone.

In November, month-on-month declines in output of consumer and investment goods were offset by a marginal increase in intermediate goods and a strong increase in output of energy products, ISTAT said.

On a work-day adjusted year-on-year basis, output in November was up 2.2%, following a 3% rise in October, coming in below a forecast of +3.3% in Reuters’ poll of analysts.

With the Italian public increasingly disenchanted with the euro, the country’s parliamentary election in March could lead to the introduction of a “new lira” as a parallel currency.

Meanwhile, following Italian President Sergio Mattarella’s dissolution of parliament on December 28, 2017, Italians will vote on March 4 to elect representatives to both chambers of the country’s legislature. Ultimately, a new prime minister will assume office in an electoral landscape in which three of the four main parties in the polls favor introducing a dual currency, Wikitribune reported.

The proposed implementation of a parallel currency would leave the euro in use for all international transactions and would continue to be used by international tourists.