Italian industrial production rebounds in December, alleviating concerns

In December, Italian industrial production saw a predictable recovery, with a detailed analysis suggesting that energy-intensive sectors might be on the verge of a turnaround. However, disruptions in the Suez Canal and subdued demand are currently constraining the potential for a significant increase in production during the first quarter.

Following a downwardly revised 1.3 per cent contraction in November 2023, Italian seasonally adjusted industrial production saw a rebound of 1.1 per cent month-on-month in December 2023, slightly surpassing anticipated figures. Throughout 2023, the average production experienced a 2.5 per cent decline compared to the previous year.

As reported by ING Think economic and financial analysis in December 2024, every major industry category, except for energy, experienced favourable increases. The production of consumer goods demonstrated the most rapid growth, with both durable and non-durable goods showing a rise of approximately 3 per cent from the previous month. Following closely behind were investment goods, which increased by 1.8 per cent, and intermediate goods, which saw a modest uptick of 0.8 per cent.

The breakdown of sectors indicates a potential shift in energy-intensive industries. Despite facing challenges from high energy costs in 2023, sectors like chemicals, metal products, and paper saw a monthly rebound in December. This hints at potential supply-side effects due to the downward adjustment of energy prices.

Looking forward, business surveys suggest a slow turnaround in expected orders, though they still need to be in expected production, possibly due to ongoing de-stocking of finished goods. Disruptions in the Red Sea and Suez Canal, causing delayed imports from the Far East, may contribute to this trend. With production likely to remain constrained in the first quarter amid weak demand, there could be a gradual improvement from the second quarter if inflation remains manageable and expected orders materialize.

This data aligns with ING's modest 0.1 per cent quarterly GDP growth forecast for the first quarter of 2024. Additionally, the higher statistical carryover from the fourth quarter's positive GDP surprise will slightly adjust with ING's average GDP forecast for 2024 to 0.5 per cent.