Italian Industrial Output Declines as Growth Seen Slowing

Italian industrial output fell for a third month in July as production of non-durable goods declined on signs the economic recovery is slowing.

Output decreased 0.7 percent from June, when it declined a revised 0.8 percent, Rome-based statistics office Istat said today. Economists forecast production to rise 0.1 percent, according to the median of 21 estimates in a Bloomberg News survey. Output fell 1.6 percent from a year earlier on a workday-adjusted basis, the first drop since December 2009.

Growth in Italy remained sluggish in the second quarter amid slowing exports and weak domestic demand, Istat said last week. A 54 billion-euro ($75 billion) austerity plan passed to convince the European Central Bank and investors that the country can tame its finances may damp growth. GDP will fall 0.1 percent in the three months through September and rise 0.1 percent in the fourth quarter, the Organization for Economic Cooperation and Development forecast last week.

Production “entered the third quarter on a very weak footing, as the weakening global cycle and the ongoing turbulence in financial markets start weighing on firms’ sentiment and, in turn, on factory activity,” economists Chiara Corsa and Loredana Federico at UniCredit Research in Milan said in a report today.

Growth Forecasts

Production of consumer goods declined 3.2 percent in July from the previous month, led by a 3.6 percent drop in non- durable goods, Istat said in the report.

The government hasn’t revised its April 11 growth forecasts that projected an expansion of gross domestic product of 1.1 percent this year and of 1.3 percent in 2012. Finance Minister Giulio Tremonti said on Aug. 13 that he was sticking by those figures.

“The government should re-open the reform agenda and deliver structural reforms to improve the competitiveness of the economy as this would increase potential GDP growth,” Fabio Fois, an economist at Barclays Capital in London, said in a note today. “GDP growth prospects remain crucial for Italy, in particular in a context of weakening growth globally.”

Fois said last week he expects the euro region’s third- biggest economy to grow 0.8 percent this year and 0.7 percent in 2012. Ben May, an economist at Capital Economics Ltd. in London, said on Sept. 8 that he sees the economy contracting in 2012 and 2013 as austerity damps demand.

Istat initially reported a 0.6 percent decline of industrial output in June.

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net.

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net