Forex »

Italian Industrial Output Falls

Finances
Share on StockTwits
Published on
www.finances.com
Italian Industrial Output Falls

Italian Industrial Output displayed a surprise reversal in the month of March according to the Italian National Institute of Statistics. Year on year Output has contracted by 0.4% compared to a rise of 0.4% the month before, this has surprised economists who anticipated this area of the economy to expand by 1.2% in March. Month on month the number fell by 0.5%, this is an acceleration of the 0.4% fall recorded the previous month, again there was an expectation of an increase of 0.3% in the month of March.

There is mounting concern around the Italian economic recovery. The lack of growth in the Eurozone’s third largest economy has the potential to destabilize the recovery of the entire single currency bloc. Italian government growth predictions of 0.8% in 2014 have been contradicted by both the European Commission and Italy’s own Institute of Statistics, economists from both of these institutions reckon Italian growth to be more in the region of 0.6% this year.

Today’s contraction in Industrial Output is a symptom of a slow down in global demand due to sluggishness in emerging markets and geopolitical tensions in the Ukraine. It is however also a symptom of weakening domestic demand within the Italian economy itself, Italy is the ninth largest economy in the world and as such is particularly susceptible to indigenous economic factors.

Specifically hampering the Italian recovery is rigidity in the structure of domestic labor markets. Reforms have been announced by Matteo Renzi’s administration but these will be hard won and any concessions achieved will take time to meaningfully impact on the economy.

In the meantime Italy has little scope to take advantage of the improving markets for European sovereign debt. Public borrowing represents over 132% of GDP and government has little option but to meet it’s Current Account deficit target of 2.6% this year.

Share on StockTwits