Italian industrial output takes the doomsayers by surprise

Up by 0.7 per cent in a single month. Italian industrial output – a recurring theme for months in all the doom-and-gloom rhetoric of politicians on talk shows – decided in July to leave analysts and economists flat-footed. The most optimistic estimates had predicted a three-tenths increase, yet the Istat figure announced a rise more than double that. The surprise is quite simply explained: following the summer break, meetings are resuming at the Ministry of Economic Development (MIMIT) to address the major unresolved labour disputes affecting what remains of Italy’s heavy industry. The Ilva dispute has yet to find a resolution, whilst the Electrolux dispute has actually intensified following a Swedish request to review agreements on working hours and the subsequent call by the trade union for an 8-hour strike. In short, looking at the major industrial complexes and the patchy increase in hours on short-time working, one might have expected industrial production to be falling further. This has not been the case. Year-on-year, the so-called trend index has remained unchanged. On a political aside, it is worth recalling how, last Sunday from the stage in Cernobbio, Minister Giancarlo Giorgetti trumpeted a forecast of 1 per cent GDP growth for 2026, revising the previous figure of 0.6 per cent upwards; and undoubtedly, the industrial production figures lend credence to his statement. The bottom line is that the second quarter performed better than expected and the third quarter appears to be following suit.

But let’s return to the details of yesterday’s figures. The economic rebound, as it has been described, affects all the main industry sectors with the sole exception of energy. The recovery is particularly marked for consumer goods (+2.1 per cent month-on-month) but also extends to durable goods, which had been experiencing negative performance for almost a year. Overall, the manufacturing sector grew slightly less in July (0.3 per cent), but the increases in the pharmaceuticals sector (+5.4 per cent) and even in the hard-hit textiles and clothing sector (+3.1 per cent) are worth noting. Energy-intensive sectors such as chemicals and rubber and plastics saw a decline, whilst transport equipment production fell month-on-month but remained up year-on-year (+1.8 per cent). The commentary from analysts at Ref Ricerche (who had anticipated the 1 per cent forecast subsequently adopted by the Ministry of Economy and Finance and by Giorgetti) is cautiously optimistic. Fedele De Novellis points out that, whilst capital goods had been propping up production in previous months, it is now consumer goods – such as pharmaceuticals and food – that are driving growth. “The downturn has ended and the situation has stabilised. It is possible that, given the stalemate over the Strait of Hormuz and fears of supply chain disruptions, companies have brought forward their decision-making. It is also worth highlighting the growth in the transport sector, which has risen by 8.7 per cent over seven months, perhaps due to a change in strategy at Stellantis.” Ultimately, we were expecting the worst, but the recession has not materialised, and business confidence indicators also reflect this sentiment.

Paolo Mameli, from Intesa Sanpaolo’s research department, is not quite as optimistic; in his view, even after July’s rebound, industrial production remains on course for stagnation in the current quarter. The high volatility between June and July appears to be due to calendar effects: the long weekend for Republic Day weighed on June’s negative change and then helped drive July’s recovery. In any case, the trend in industrial production remains weak because energy-intensive sectors are bound to be affected by the new surge in energy prices; the recovery seen in the automotive sector is proving short-lived; and the support provided by inventories is partly waning. Resilience to geopolitical and energy shocks has so far been surprising, but the negative effects could be spread out over time, and the level of demand for industrial goods – both domestic and foreign – does not appear to allow for a recovery in production activity that is, this time, sustainable. Therefore, Mameli argues, do not count on industry, but on services to boost GDP.