Italy Industry Output Drops, Joining German and French Trend

(Bloomberg) -- Italian industrial production fell more than expected, spelling trouble for the euro-area economy after disappointing numbers from Germany, France and Spain.

Italy’s populist government has been struggling to meet its expansive agenda and has already had to trim its growth outlook for this year. The specter of a European slowdown is pressuring the coalition in Rome even further as the country heads toward recession.

Output dropped 1.6 percent in November from the month before, national statistics agency Istat said Friday in Rome. A Bloomberg survey of economists called for a 0.3 percent drop. Production was down 2.6 percent on an annual basis, the biggest drop since October 2014.

Italy Industry Output Drops, Joining German and French Trend

Industrial production fell 1.9 percent in Germany in November compared with the previous month, also raising the risk of recession in Europe’s largest economy. Output dropped 1.3 percent in France in the same month, while Spain reported a 1.5 percent monthly drop.

“Recent data continue to be disappointing and we expect that Italy entered a technical recession in the second half of last year,” Nicola Nobile, an economist at Oxford Economics in Milan, said before the Istat report was released. “The recession could drag on, particularly if growth in the euro region continues to disappoint.”

Key Insights

  • Italy’s economy contracted 0.1 percent in the third quarter, and data indicate further shrinking took place in the final three months of the year. Istat will release a preliminary reading for the fourth quarter on Jan. 31 for the euro-area’s third-largest economy.
  • The rescue of Genoa-based Banca Carige SpA has been testing the fractious coalition government.
  • Italy’s leaders overhauled this year’s budget at the insistence of the European Union, which found Italy’s initial plan overly expansive.

The standoff with the EU roiled financial markets, pushed up the nation’s borrowing costs and was only resolved last month. Further causes for concern this year are the health of the banking industry and less monetary support from the European Central Bank.

Italian workday-adjusted industrial production fell 2.6 percent in November on an annual basis.

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