Italian industry is holding on, supported by exports. According to theanalysis by Prometeia and Intesa Sanpaolo of the Industrial Sectors of February 2024, the Italian manufacturing sector confirms stable turnover in the first 11 months of 2023 compared to the previous year (+0,7%), confirming the record levels achieved in 2022. Although producer prices are still increasing in cumulative terms (+2,2% in first 11 months), in the two-month period October-November there was a decline (-1,3%), mainly driven by producers of intermediates (such as metallurgy, which recorded a -14,5%). Even considering inflation, the decrease remains limited, with a drop of 1,6% between January and November at constant prices.
THEexport supports the sector, since, despite a 3,4% drop in global imports of goods, the worst figure in the last 15 years excluding the 2020 shock, Italian exports have maintained stability at constant prices, gaining market share and continuing to grow (+2,3%) in terms of current values. The solidity of sales on foreign markets, especially in Asia and the United States, partly offset the weakness of trade within the European Union, especially the decline in direct sales in Germany (-1,4%), the main Italy's trading partner, strongly linked to German production chains.
The domestic market is weak, consumption is falling
I consumption they started show signs of failure starting from the summer months of 2023, after a period of stability in the first half of the year, driven above all by the services and automotive sector still recovering from post-Covid. The increase in prices has weighed heavily on the budgets of Italian families, already tested by the pandemic and stagnant wages for over a decade, leading to a decrease in purchases of goods (-1% in real terms in the first 9 months of 2023), with a contraction in semi-durable goods (-3,6%) and non-durable goods (-2%), partially offset by the growth in durable goods (+5,9%), mainly driven by car sales.
- investments have also slowed during 2023, influenced across Europe by tightening financing conditions and growing uncertainty. In Italy, the revision of tax incentives for construction was added, leading to a 2,7% decrease in investments in construction in the first 9 months of the year (-7,8% in the residential sector, +4,4 % in civil engineering, supported by PNRR infrastructure projects), after two record years. Only the double-digit growth in means of transport and a still positive evolution in purchases of plants and machinery contributed to keeping the overall profile of investments stable.
Automotive and pharmaceuticals did well, furniture and household appliances did poorly
Deflated revenue growth ranking in 2023 is led by Automotive, Wide consumption e Pharmaceutical. Vehicles and motorcycles (+14.7%) benefited from strong internal demand and the release of orders that remained unfulfilled due to supply difficulties. The FMCG sector (+9.2%) is driven by cosmetics, both on the domestic and foreign markets. Pharmaceuticals (+4.3%) also found support in the domestic market despite a decline in exports in the second half of the year due to the return of influenza viruses.
At the foot of the podium, theElectrical engineering (+1%) is favored by the push of the sectors linked to the energy transition, while theElectronics (-0.5%) is affected by the slowdown in demand for ICT goods, linked to international uncertainty.
In the central part of the ranking, Mechanics, Food and drinks e Metallurgy, after a difficult start to the year, recorded a rebound in deflated turnover in the two-month period October-November, anticipating an exceeding of the minimum point. The recovery in Mechanics (+3.9% in the two-month period October-November, +0.3% in the first 11 months) is mainly due to the renewed momentum on the foreign market, while Food and Beverages (+2.4% October-November, stable in the first 11 months months) benefited from exports.
La Metallurgy shows signs of recovery with an increase of 2,9% compared to a contraction of -4,4% in the first 11 months. In the other productive sectors, there is a slowdown in the crisis, with a less marked decrease in turnover: come on Metal products (-1,9%, -5,3% in the first 11 months) ai Building products and materials (-3%, -8,4% in the first 11 months), give it other intermediates (-3,8%, -11,1% in the first 11 months) to Chemical intermediates (-6,3%, -17,4% in the first 11 months).
However, there are some sectors that record below average trends, such as Furnishings (-8,7% in the first 11 months) ed Appliances (-5,5%), with persistent difficulties in the household appliances sector, also highlighted by crisis tables opened by important multinationals in Italy.
Finally, the fashion system closes the overview with a contraction of -3,2% in the first 11 months, after a promising start to the year, highlighting a loss of momentum especially starting from the spring months, due to the decline in domestic and foreign demand.
Manufacturing sector: the situation in Europe
Among the main European competitors of Italy there is greater dynamism in the manufacturing sector France and especially of the Spain. This is due to a export growth more marked (Spain +4.3%, 10 months 2023; France +4.6%, Italy 2.3%) and to better resistance of household consumption. In particular, the Spain stands out for one increase in retail sales by 7.4%, summarizing an increase in both food and non-food goods, including fashion.
Both countries also show a expanding production, with Spain recording an increase of 2.1% (October-November 2023, +0.3% 11 months) and France recovering with a +4% (October-November, +1.4% 11 months), although they still remain behind Spain and Italy compared to 2019 levels.
On the contrary, the Germany is facing more difficulties, with a modest increase in exports (+1.4%, 9 months 2023), weak consumption and a deterioration in production at the end of the year, influenced by the ongoing transition towards less energetic production. German chemistry has been hit hard by the energy crisis (due to its dependence on Russian gas). Energy supply difficulties add to the phase of weakness in manufacturing activity, making more intense efforts necessary for the green transition of the sector, including the reconversion of plants and adaptation to new production inputs.
Confidence postponed to the second half of 2024
- trust indicators suggest an uncertain picture, postponing the recovery until the second half of 2024. The Istat index which measures the confidence of manufacturing companies improves slightly in January 2024 but remains in negative territory. There are still many uncertainties which will continue to influence orders and demand until the first half of 2024, but It seems like the worst is over.
The second half of the year could bring greater recovery opportunities, as the deflationary trend is expected to strengthen, which should stimulate consumption. A positive signal also comes from the consumer confidence index, which recorded a further improvement in January, based on forecasts of a decline in inflation.
The unknown of geopolitical tensions
He rdownside risk to growth is represented byworsening geopolitical tensions, especially with the Russian-Ukrainian conflict and new outbreaks in the Middle East. The crisis in the Red Sea it is already influencing transport prices and raises fears of imbalances in world trade, which could undermine global value chains.
For Italy, the share of goods in transit from the Suez Canal represents 38% of non-EU imports, but it drops to 14% if we consider total imports from the world, similar to the Spanish situation; Germany and France have a percentage of less than 10% of total imports. Sectors such as fashion, metallurgy, chemical intermediates and electrical engineering, exposed to the negative effects of transport and cost problems, are particularly affected.
For example, a significant percentage of supplies in the fashion and electrical engineering sectors transit through the Red Sea, as do a portion of raw materials in metallurgy and chemical intermediates. The current weakness in demand could mainly affect the profitability of companies, limiting the ability to pass on cost increases to sales prices, unlike what happened during the energy crisis.
