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Paolo Pizzoli, senior economist at ING, notes that Italy’s July Industrial production data turned out softer than expected as the seasonally-adjusted measure contracted by 0.7% month-on-month (-0.2% MoM in June) and the working day-adjusted version was also down 0.7% year-on-year, posting the fifth contraction in a row.

Key Quotes

“The monthly contraction was broad based, with all the big aggregates except energy in negative territory, and was particularly marked (-1.6% MoM) in the key investment goods segment.”

“Looking ahead, the combined reading of business confidence and manufacturing orders data does not validate hopes for a short-term rebound in production. Order data has been deteriorating recently, more clearly in the foreign component, which is apparently bearing the brunt of international headwinds.”

“We are currently anticipating another flat GDP quarter in 3Q19 and flat GDP growth for the whole of 2019, and we tentatively stick to this call. However, after today’s production data, the risks seem to lie to the downside. Should production weakness be confirmed in the Aug-Sep readings, the chances of inventory-driven support to quarterly growth would likely evaporate.”