Italy Recovery Looks More Certain as Industry Picks Up a Gear

  • Production data bode well for third-quarter economic growth
  • Fourth monthly increase signals possible investment pick up

Italian industry increased output for a fourth month in August, setting the economy up for another solid quarter of growth.

Production rose 1.2 percent from July, far more than economists had forecast, while a less-volatile three-month average had its best annual growth in seven years. The increases fit with the government’s prediction that the economy is regaining stability after the longest recession in the country’s post-war history.

Bloomberg Intelligence analysts said the strong figures mean growth in the third quarter may have been stronger than the 0.3 percent they currently predict.

Manufacturing confidence rose last month to the highest in a decade, consumer sentiment is also on the up and the government has become more optimistic about the recovery, boosting its most recent projections.

“The production rise is an important support factor for economic growth in the third quarter,” said Loredana Federico, chief Italian economist at UniCredit SpA. Data also backs expectations of a “recovery in investments, particularly in machinery and equipment.”

Prime Minister Paolo Gentiloni’s government sees gross domestic product expand 1.5 percent this year and at a similar pace in 2018 and 2019. The figure for 2017 is slightly higher than the 1.4 percent consensus in Bloomberg’s monthly survey.

’Reinforcing’ Perspectives

Istat’s leading indicator is “reinforcing the growth perspectives in the short term,” bolstered by the manufacturing sector and investments, the statistics bureau said last week in its monthly economic report.

The August production increase was led by gains in intermediate goods such as basic metals, rubber and plastics.

“The latest indications from our survey among executives tell us that the companies are accelerating investments in this second half of the year,” Bank of Italy head of economic research Eugenio Gaiotti told the Parliament’s Budget Joint committees Oct. 3.

Milan’s FTSE MIB stock index was down 0.7 percent as of 11:31 a.m. local time. The yield on Italy’s 10-year bond was little changed at 2.12 percent.

— With assistance by Andre Tartar, and Giovanni Salzano

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