Italy Output Unexpectedly Plunges, Signaling Slowdown

  • Outlook for companies, consumers diverges, Istat says
  • Business confidence fell for third straight month in January

Italian industrial production unexpectedly plunged in December, signaling that the recovery in the euro region’s third-biggest economy probably slowed in the last quarter of 2015 and might struggle to continue in coming months.

Output fell 0.7 percent from November, which registered a 0.5 percent drop, national statistics bureau Istat said in a report issued Wednesday in Rome. The median of 19 estimates in a Bloomberg survey called for a 0.3 percent increase in the last month of 2015. On an annual, work-day-adjusted basis, production declined 1 percent, Istat said.

Italian businesses grew pessimistic about the economic outlook for the economy after gross domestic product expanded in 2015 at a progressively slower pace. The manufacturing-sentiment index dropped in January as companies remained cautious about the country’s ability to maintain a recovery this year. In 2015 the limited economic growth was supported by a revival in consumption amid improvement in the labor market.

The output report “highlights a widening gap between expectations and actual data that needs to be monitored carefully in coming months,” Loredana Federico, an economist at UniCredit Bank AG in Milan, said in a telephone interview. “Moreover, the turbulence on financial markets at the start of the year might now reflect negatively on business sentiment and investments.”

Less Confidence

Companies’ executives have less confidence in the growth outlook, as “the uncertainty about the pace of recovery in manufacturing is expected to continue in the next few months” amid a slowdown in emerging economies, Istat statistics bureau Istat said in a Feb. 5 report.

Industrial output recorded in the three months through December a 0.1 percent fall compared with the previous three months, after increasing in each of the earlier four quarters. Istat will release Italy’s GDP report for the fourth quarter on Friday.

As the short-term outlook for households and companies is seen “evolving in different ways,” uncertainty about the manufacturing activity is expected to continue in the next few months, Istat said in its monthly report on the country’s economic trends.

To adjust to flagging growth in China, Italy’s biggest manufacturer Fiat Chrysler Automobiles NV is delaying the launch of some models at its Alfa Romeo and Maserati units. Falling sales in Brazil have pushed last month Chief Executive Officer Sergio Marchionne to review the group’s business plan.

Prime Minister Matteo Renzi’s legislation overhauling the country’s labor code and including tax breaks to reward those employers who hire people on an open-ended basis led to a fall in unemployment. The rate remained in December at 11.4 percent, signaling the risk that the effect of the new labor legislation might cease without an acceleration of economic growth.

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