Italian Industrial Output Drop May Signal Longer Recession

(Bloomberg) -- Italian industrial production fell for a fourth straight month, in a sign the recession that started late last year may persist.

The populist coalition government has been swamped by a rash of negative economic data, including the European Commission’s slashing of this year’s growth forecast by a full percentage point.

Italian industrial output fell 0.8 percent in December from the month before, statistics agency Istat said Friday in Rome. A Bloomberg survey of economists called for a 0.4 percent monthly increase.

Italian workday-adjusted industrial production fell 5.5 percent in December on an annual basis, the biggest drop since December 2012. Istat warned that it foresees “serious difficulties” in maintaining the country’s economic activity levels, commenting later in its regular monthly note.

The Italian output slowdown comes as the full 19-nation euro area braces for possible lower growth. The European Commission on Thursday slashed its growth forecasts for all of the euro region’s major economies.

Key Insights

• The populists have gambled that their ambitious program will end years of Italian economic stagnation.
• Internal squabbling over a high-speed rail link to France and the treatment of migrants crossing the Mediterranean to Italy have tested the cohesiveness of the coalition.
• Italy’s populist leaders overhauled this year’s budget at the insistence of the European Union, which found Italy’s initial plan overly expansive.

Last year’s standoff with the EU roiled financial markets, pushed up the nation’s borrowing costs and was only resolved last month.

--With assistance from Harumi Ichikura and Giovanni Salzano.

To contact the reporters on this story: Kevin Costelloe in Rome at kcostelloe@bloomberg.net;Giovanni Salzano in Rome at gsalzano@bloomberg.net

To contact the editor responsible for this story: Fergal O'Brien at fobrien@bloomberg.net

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