Weakness in manufacturing activity is still one of the black spots in the Italian economic situation. Industrial production remained on a negative trend in August (-0.1% 3m/3m), and purchasing managers in the manufacturing sector continued to indicate a deterioration in activity in September (manufacturing PMI at 48.3; -1.1 points over one month), mainly due to falling demand (with the new orders component down 3.1 points, standing at 45.7).
This deterioration on the industry side, combined with the stagnation seen on the services side (services PMI at 50.5; -0.9 points), is now adversely affecting business sentiment: the composite PMI has moved into contraction territory for the first time since the start of the year (49.7; -1.1 points).
Harmonised inflation finally fell below 1% year-on-year at the end of the third quarter (0.7% y/y in September; -0.5 pp month-on-month), mainly due to the significant deflation of the energy component (-8.7% y/y; -2.5 pp), but also to the clear disinflation of the core component (1.8%; -0.5 pp). By contrast, inflation in services remains high (3.1%), despite slowing gradually.
Household confidence (-15.6) is still below its long-term average[1] and has not really managed to take off since the start of the year, despite the gains in purchasing power brought about by falling inflation and rising real wages (+3.3% y/y in Q2). According to the results of the European Commission's survey, the sub-component relating to intentions to make major purchases over the coming year has improved (-24.4; +0.7). However, these expectations are not yet reflected in the ‘hard’ household consumption data, as retail sales momentum was still slightly in the red in August (-0.1% 3m/3m) and new vehicle registrations remained very negative in September (-8.0% 3m/3m).
The picture at the end of the third quarter is therefore mixed. We expect the Italian economy to remain on a moderate growth trajectory in Q3 (0.2% q/q) and Q4 (0.4%). Over the year as a whole, Italian real GDP should grow by 0.9%, narrowly outpacing Eurozone growth (0.8%), after exceeding it more significantly, and unusually, in 2022 and 2023.
Article completed on 22 October 2024
