Italian manufacturing closes 2014 with unchanged turnover levels compared to 2013
The turnover of the Italian manufacturing industry should have closed 2014 with substantial stability, at levels below those of 70 by around 2011 billion and by 185 compared to the 2007 peak. The average manufacturing figure conceals heterogeneous results among the sectors, with the strong expansion, between 3% and 4% in nominal terms, of the fashion system and household appliances and the marked rebound, over 10%, of motor vehicles and motorcycles (in all these sectors the contribution of foreign sales was decisive). On the other hand, very negative results, between -2% and -4%, are estimated for producers of intermediate goods (especially chemicals and construction products) and for food, sectors in which success on foreign markets was not enough to compensate for the weakness of domestic demand.
For 2015 recovery expectations supported by exports
The coming months will be marked by the effects of the new international scenario, characterized by the sudden depreciation of the euro against the dollar, the consolidation of the US recovery, the start of Quantitative Easing by the ECB, greater risks in emerging countries and the collapse in oil prices . The effects of these factors will, on the whole, be positive. Despite the difficulties of some markets (primarily oil producers), Italian industry will be able to benefit from a new boost on international markets, capable of reinforcing the excellent competitive results obtained already in 2014.
Not only thanks to the weak euro
Italian competitiveness also asserted itself during the months of strong appreciation of the European currency. Again in the January-August period of 2014, against an average value of the dollar/euro exchange rate of 1.36, the growth of Italian exports of manufactured goods (+1.8%) was among the most sustained in the world, well above the average figure of international trade (-1%). Performance abroad then improved after the summer months: exports in the first 10 months recorded a 2.4% growth at current prices, widespread in all sectors (with the exception of Electronics and Metallurgy), with Automotive and motorbikes, Pharmaceuticals and Fashion system with growth of more than 4%, followed with about one point less by FMCG, Mechanics and Appliances. These results could show a further improvement in the coming months thanks to the devaluation of the European currency, even if it should be emphasized that less than 30% of Italian exports go to countries with currencies that have appreciated against the euro (in addition to the United States , most of emerging Asian economies and the Middle East). These countries also hold 35% of the shares of trade on relevant markets for Italian companies. Taking into account the weight of countries with appreciating currencies both as outlet markets and as competitors, the sectors that should benefit most from the fall of the euro are fashion and mechanics, in addition to furniture, household appliances and electronics .
Looking ahead: the positive signals on the domestic market are strengthening
The final part of the year is confirming the probable improvement of the domestic situation for 2015, able to strengthen the recovery of Italian industry. The most comforting data is that relating to domestic consumption, which between low inflationary pressure, a sharp drop in fuel prices, the influx of foreign tourists for Expo 2015 and expansionary fiscal measures could find a path of growth again. The new and better prospects for household consumption should also fuel business confidence, restarting an investment cycle that will benefit not only from the continued expansion of exports, but also from the renewal and simplification of incentives and the bank credit normalization process .
Business accounts between deflation and recovery in demand
The euro and the price of oil will not only influence demand prospects, but will also have a significant impact on the accounts of Italian companies. Although particular tensions on the operating costs of companies had not already manifested themselves in the last two years, we estimate that with oil at $50 on average in 2015 (and a dollar/euro exchange rate of 1.10) the operating costs of Italian manufacturing companies could show a decrease in the order of 2% (a saving of over 16 billion euro). In this simulation, users of petroleum derivatives (chemistry) and the most energy-intensive sectors (metallurgy and construction products) would have the most advantages, but with benefits that will fall downstream along all production chains (Figure 6). If deflationary tensions were definitively removed by the QE of the ECB, in the coming months the mix of recovering demand, falling costs and competitiveness from a weak euro could support the recovery of satisfactory levels of margins and production volumes for Italian companies, contributing to the start of the financial recovery that manufacturing needs after the long crisis.
