Well the storm cluds certainly continue to gather over the Italian economy. We learn today that Italian industrial production fell for a fourth month in December as slowing economic growth cut demand for manufactured products.
Production declined 0.5 percent from the previous month, the Rome-based national statistics office ISTAT said today. Production dropped a workday-adjusted 6.5 percent from December 2006, the biggest year on year decline since December 2001.
The line from August you can see in the chart above seems very clear. And if we put the data on industrial output together with that for retail sales and the evolution in the trade deficit, then the possibility certainly exists that Italy fell into recession in Q4 2007. Anyway we shall all soon know, as ISTAT will be releasing provisional data before the end of the month.
The drop in Italian production in December contrasted with the situation in France, where a gain output expanded, according to the French Statistics Office INSEE, and French industrial production rose a month on month 0.7 percent.
Production of consumer goods declined 1.4 percent from November as the output of durable goods like refrigerators fell 1.3 percent. The output of non-durable goods declined 1.5 percent. Investment goods production fell 2.3 percent in the month and intermediate goods dropped 0.3 percent.
The decline in output in December contributed to a 3.4 percent drop in Italian production in the fourth quarter on a workday-adjusted basis. Production fell 0.2 percent in 2007 on an adjusted basis from the previous year. Unadjusted output gained 0.4 percent in 2007.
The decline in production may well be continuing into 2008, since Italian business confidence declined to a two-year low in January as a bleaker economic outlook hurt consumer demand for manufactured products.
Confindustria, Italy's largest employers' lobby, cut its 2008 growth forecastin December to 1 percent, about half the estimated pace for 2008. The Organization for Economic Cooperation and Development also cut its forecast for 2008 Italian growth on December 6th to 1.3 percent, from the 1.7 percent predicted in May. All these numbers may well now be subject to considerable downside risk.