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Economy in Brief

Italy is one of the larger, but not one of the leading EMU economies. Still its performance in the industrial side is fading after a strong run that had begun to look like it was a sustained recovery (see chart below). Across the various sectors output is mostly falling in February. Transportation is a notable exception. Sequential growth rates by sector (table above) show growth fading across most sectors as well with capital goods as and exception along with transportation- still it’s not enough to bolster the overall index of output that has dropped by two percentage points in two month’s time.

Italy’s industrial sector had hit a sort of bottom in early 2005 and since then recovery has been largely underway. In late 2006 Italy’s output took a couple of very sharp moves to the upside and from that base it is now faltering with two sharp monthly declines that have reduced Yr/Yr real output growth from 6% to 2%. All this has put the uptrend in jeopardy.
Italy IP Excluding Construction
SAAR except m/m Feb-07 Jan-07 Dec-06 3-mo 6-mo 12-mo
IP-Manufacturing -0.4% -1.6% 1.6% -1.6% -0.2% 2.1%
Consumer -2.1% -2.4% 2.6% -7.7% -5.3% -2.4%
Capital Goods 0.2% -2.3% 4.0% 7.5% 2.8% 3.6%
Intermediate -0.7% -1.8% 0.7% -7.1% -1.8% 1.1%
Transportation 3.4% -5.0% 4.2% 9.7% -12.0% 1.2%
Graphically Italy shows a deceleration that cuts across sectors.

Across the euro area and in the United Kingdom, industrial production has turned more mixed. In February, Germany and France are up while Spain, Italy and the UK are lower. For now the 3-month trends in German and French industrial production are very strong. We await the final tabulations to give us new results for the zone itself. But several of the larger economies are struggling. And Germany does not itself yet have strong domestic demand to feed off of. Strong trade ties with China and the US have helped to keep German output advancing. But the UK and Italy show faltering trends; Spain is uneven. Germany and France show continued acceleration in output. For Germany the trend is ingrained,. For France it was not present in January and has only emerged in February. While forecasts for the Euro area have all been upbeat there is a decided dark cloud hanging over the region. Italy is just one example. The downward revision to EMU-wide consumption in revised GDP is another. Still, Euro optimism springs eternal.  
Euro area and UK IP and MFG
SAAR except m/m Mo/Mo Feb-07 Jan-07 Feb-07 Jan-07 Feb-07 Jan-07
Euro area Detail Feb-07 Jan-07 Dec-06 3-Mo 3-Mo 6-mo 6-mo 12-mo 12-mo
Germany: 0.8% 1.0% 0.1% 8.1% 11.6% 6.9% 8.5% 8.2% 8.2%
France: IP ex Construction 1.1% -0.2% 1.0% 7.7% 2.0% 1.6% 1.0% 2.6% -0.4%
Italy -0.4% -1.6% 1.6% -1.6% 0.0% -0.2% 4.0% 2.1% 3.6%
Spain -5.3% 9.3% -3.0% 1.9% 24.2% -2.0% 22.6% 5.2% 9.2%
UK -0.6% -0.2% 0.1% -2.7% 0.4% -1.4% 0.6% 1.2% 1.9%
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