Italian IP Finds the Edge of the Earth…and Falls Off

OK…the earth is not flat. No one is falling off ‘the edge.’ But the decline in Italian IP across sectors is abrupt and the fall is sharp as though it has fallen into some sort of abyss. The chart is very telling. The table is too. The table is ‘coded’ with negative values in red except for ranking data where values are red when they are below their respective medians (below 50%). Among 45 categories in the IP portion of the table, only four are positive! In the lower portion of the table, the indicators and their standings show 27 observations of which four are not negative and among those four, three are zero. None of this is reassuring. Italy is experiencing some sudden broad weakness after having shown a good degree of resiliency. Manufacturing IP as well as two of its three main sectors – as well as transportation- show ongoing decelerating trends.

There is little here to equivocate on. Everything is weak and most categories are showing sequential worsening. Quarter-to-date growth rates for IP or changes in the indicators are negative everywhere except for manufacturing IP. Compared to the January 2020 level of IP categories or of survey values, all observations are weaker than their levels of five years ago. That is almost breath-taking. That’s half a decade.

Ranking data are largely at or below their 25th ranking percentile. Six of the eight categories show rank percentile standings below their 15th percentile.

Outlook/assessment Much of Italy’s weakness is new. Since January 2020, IP is lower by 10%, but over the last 12 months it is down by 8.4% - that is the bulk of that net drop. Transportation output is down by 13.7% since January 2020 and by 19.4% over the last 12 months. Indicators show the EU index for the industrial sector in Italy lower by 4 points from January 2020 and down by 1.7 point over 12 months. Italy’s ISTAT index has fallen 5 points over 12 months and the bulk of its 6-point drop since January 2020. The ISTAT outlook for production is down by 2 points over 12 months and lower by 7 points since January 2020. On balance, Italy’s industrial sector is looking extremely weak. It seems to be under new and severe downward pressures. At a time of global weakness and ongoing manufacturing weakness, this remains a sector to watch closely.