Industrial production in Italy grew by more than expected in August, reaching figures only slightly less than 2019 levels and outperforming other major economies in the eurozone.
Italy industrial production
The figures, released by the Italian National Institute of Statistics (Istat), are further evidence that the country's economy - long considered as one of the bloc's most sluggish - is seeing a stronger recovery from the coronavirus pandemic than previously expected.
August saw an increase in industrial production (excluding construction) of 7.7% compared with July. This was much stronger than the forecast of 1.3% by economists polled by Reuters, and the fourth consecutive month in which industrial output rose by over 7%.
The 7.7% rise is also far stronger than in comparable economies for the same month with France increasing by 1.3%. the UK by 0.3% and a marginal contraction in Germany.
The data shows that Italian industrial output was down only 0.3% in August 2019, up from -8% in July. By comparison, industrial output in Germany - long seen as Europe's engine room - was still down 10% on last year's level. In France and the UK, output was down by more than 6%.
The strong performance in Italy is largely attributed to durable consumer goods such as cars, where output has been growing steadily by almost 20% month-on-month. Even so, the expansion was broad with all major sectors covered seeing an increase. Fashion, one of Italy's largest industry, has seen a monthly rebound of 36%.
Paolo Pizzoli, senior economist at ING said: "Recent hard data points to a likely positive surprise on 3Q20 GDP growth estimates, but developments on the epidemic front... add downside risks to the fourth quarter.
"These two quarters might cancel each other out, and we tentatively confirm our forecast for an average 10% GDP contraction over the whole of 2020."
Earlier this week, the Italian government released its updated economic forecasts for 2020-2023. It expects the economy to shrink by 9% overall this year and to expand next year by 6%.
However, the country's budget deficit is likely to increase to 10.8% of GDP, pushing up government debt by 23.4 percentage points to 157% of gross domestic output.
Loredana Maria Federico, chief Italian economist at UniCredit was quoted by FT as saying the government forecast reflected “a more-generally cautious attitude towards keeping the adjustment path of Italy’s very high public debt under control”.
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