After contracting by an upwardly revised 1.3% in November, seasonally adjusted Italian industrial production rebounded by 1.1% month-on-month in December, marginally beating expectations. In 2023, average production contracted 2.5% compared to 2022.
In December, all major industrial sectors except energy posted positive gains. The production of consumer goods grew the fastest: both durable and non-durable goods increased by around 3% in the month, followed by investment goods with +1.8% and intermediate goods with + 0.8%.
The sector breakdown shows that something could start to change when it comes to energy-intensive sectors. Those most affected during 2023 by high energy costs, such as chemicals, metal products and paper, recorded a monthly rebound in December. This suggests that the downward adjustment in energy prices could begin to see some supply-side effects.
Looking ahead, business surveys point to a slow recovery in expected orders (not yet in expected production), possibly reflecting an ongoing drawdown of finished goods stocks. Delayed delivery of imports from the Far East due to disruptions in the Red Sea and Suez Canal could influence the process. In a weak demand environment, it appears that production will remain limited during the first quarter of this year, but the outlook could gradually improve from the second quarter if inflation holds well and the expected improvement in orders materializes.
Today’s data still appears to fit our view of a modest 0.1% quarterly GDP growth during the first quarter of 2024. As a result of the larger statistical pass-through of the positive Q4 GDP surprise, we have marginally adjusted our forecast average GDP by 2024. up to 0.5%.