Italy Hit by Trade War as Export Orders Fall the Most Since 2009

(Bloomberg) -- Italy’s manufacturing slump is set to deepen in coming months, after industrial orders from abroad shrank the most in almost a decade.

Highly indebted and with a fragile coalition government trying to restore investor confidence, Italy’s growth is set to stagnate this year and keep underperforming its euro-area peers in 2020.

The cooling of global trade and a slowdown in the currency bloc are further complicating the outlook for Europe’s second-largest manufacturer.

Italy’s statistics office on Wednesday said industrial orders fell 10% in August, the biggest decline since October 2012. Driving the contraction: orders from abroad, which slumped 16.3%.

Vehicles was the hardest hit sector, with orders down 27.3% compared with a year ago. The statistics office said that August 2018 orders were inflated by an aircraft order.

Italy’s manufacturing activity has been contracting for the past 12 months, according to Markit’s index of purchasing managers.

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Premier Giuseppe Conte on Wednesday night signed off on a mildly expansionary draft budget that stretches the flexibility of European rules, though a repeat of last year’s standoff with Brussels isn’t anticipated. Still, most funds have been earmarked to avoid a scheduled increase in sales tax, leaving little for growth-promoting measures.

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