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Economy in Brief

Italian Industrial Turnover Cools - Remains Strong
by Robert Brusca  September 22, 2021

Italian industrial turnover continues to cool, but industrial sales still run at a very strong pace. Turnover rose by 0.9% in July while the year-on-year growth rate of 18.6% rank is in the top 2% of all growth rates since 2001.

All of the year-on-year sector growth rates have similarly strong rankings; none of them is even as ‘low’ as in the top five percentile. The 12-month to six-month to three-month sequential growth rates do not point to a clear trend. Only investment goods show a clear sequential path and that is to slowing growth. Investment goods shipments even show a net decline in turnover over the last three months unlike any other category.

Investment goods shipments have been the most mercurial. They are the weakest over three months and yet the strongest in the incoming quarter-to-date. Intermediate goods are steady and have had the strongest growth sequentially over every timeline segment. Consumer nondurable sales have lagged and it generally rates as the weakest on each timeline or as the second weakest at best. Consumer goods shipments also have tended to rank on the weak side among sectors.

There is a lot of good news here; still, it is hard to handicap the virus.

Assessing trends since January 2020 shows nondurables as the weakest on that span. Intermediate goods have been the strongest. Consumer durables output trends have been strong while nondurables have been weak.

Virus progress
During this period, Italy has continued to stay on top of the virus. From end-October of last year to mid-May of this year, Italian infections, hospitalizations and deaths were high. But by mid-May, it became clear that all these trends were breaking down. By early-June and into July, Italy was experiencing reductions and relatively low readings on virus metrics. This may be why industrial trends popped strongly in June and have remained in gear but with less push through July.

Virus issues
It is hard to assess trend with the virus coming on stream creating disruption then backing off. Yet, vaccination rates are rising. In Italy, 73% of the population is vaccinated with at least one shot and 66% have two shots. But the new quarter is about the Delta variant and how effective the vaccines against it. Still, what is clear is that even when infections flare deaths are not rising in step. Vaccines help and some people seem to be losing some of their fear of virus.

Across Europe today Dutch consumer confidence rose, Danish consumer confidence rose and in Turkey consumer confidence rose. In addition to better consumer attitude, forecasts seem to be gaining some optimism.

Institutions are starting to take a more optimistic look at things as Germany’s research institute, the IFO, raised its outlook for growth. In Asia, the Asian Development Bank (ADB) hiked its outlook for growth in the region as well. The OECD also raised its outlook even as it complained about the uneven nature of the expansion.

There are signs that the global economy is doing better despite the Delta variant and despite slow spread of inoculations in developing countries. Italy is a good example of this progress. But risks remain. The Delta variant may not even be the last variant we see from this virus. That remains to be seen. But for now, the global economy is performing well and expected to perform a bit better. And there are still formidable unknowns.

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