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Italian industrial production was stable in September

September's industrial production data and October survey data suggest that the soft economic patch will remain in place over the fourth quarter, with downward pressure on goods as the only positive fallout.

The soft patch in Italian industry continued in September, according to Istat’s data. Seasonally-adjusted production was flat on the month, and the working days adjusted measure was down 2% on the year. In September, production was 3% lower than at the pre-Covid peak.

A quick look at big industry aggregates shows a sharp monthly decline in consumer goods (-2.2% month-on-month), offset by increases in investment goods (+1.5% MoM), intermediate goods (+0.3% MoM) and energy (+1.1% MoM). The manufacturing breakdown shows that previous patterns in yearly changes have been broadly confirmed: sectors which had been particularly penalised by supply chain disruptions such as the transport equipment industry continued to rebound,

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Inflation Numbers Take Center Stage as Quarter Comes to a Close

Michael Hewson Michael Hewson 30.06.2023 09:50
Inflation numbers a key focus as we round off the quarter       European markets continued their recent patchy performance, as we come to the end of the week, month, quarter, and half year, with the FTSE100 sliding back while the likes of the DAX and CAC40 were slightly more resilient, after German inflation came in slightly higher than expected in June.   US markets were slightly more positive, but even here the Nasdaq 100 struggled after a sizeable upward revision to Q1 GDP to 2%, and better than expected weekly jobless claims numbers sent US yields sharply higher to their highest levels since March, while the US dollar also hit a 2-week high.   The surprising resilience of US economic data this week has made it an absolute certainty that we will see another rate increase in July, but also raised the possibility that we might see another 2 more rate increases after that.   The resilience of the labour market, along with the fact that core inflation remains sticky also means that it makes the Federal Reserve's job of timing another pause much more difficult to time. Today's core PCE Deflator and personal spending numbers for May could go some way to making that job somewhat easier.   Core PCE Deflator is forecast to remain unchanged at 4.7%, while personal spending is expected to slow from 0.8% to 0.2%. While the Federal Reserve isn't the only central bank facing a sticky inflation problem, there is evidence that it is having slightly more success in dealing with it, unlike the European Central Bank which is seeing much more elevated levels of headline and core prices. Yesterday, we saw CPI in Germany edge higher from 6.3% in May to 6.8%, while in Spain core prices rose more than expected by 5.9%, even as headline CPI fell below 2% for the first time in over 2 years.   Today's French CPI numbers are expected to show similar slowdowns on the headline rate, from 5.1% to 4.6%, but it is on the core measure that the ECB is increasingly focussing its attention. Today's EU flash CPI for June is forecast to see a fall to 5.6% from 6.1%, however core prices are expected to edge back up to 5.5% after dropping to 5.3% in May. Compounding the ECB's and other central banks dilemma when it comes to raising rates is that PPI price pressures are falling like a stone and have been since the start of the year, in Germany and Italy. In April French PPI plunged -5.1% on a monthly basis, even as the year-on-year rate slowed to 7% from 12.8%.   If this trend continues today then it might suggest that a wave of deflation is heading our way and could hit sometime towards the end of the year, however while core prices remain so resilient central banks are faced with the problem of having to look in two different directions, while at the same time managing a soft landing. The Bank of England has an even bigger problem in getting inflation back to target, although it really only has itself to blame for that, having consistently ignored regular warnings over the past 18 months that it was behind the curve. The risk now is over tightening just as prices start to fall sharply.   Today's Q1 GDP numbers are set to confirm that the UK economy managed to avoid a contraction after posting Q1 growth of 0.1%, although it was a little touch and go after a disappointing economic performance in March, which saw a monthly contraction of -0.3% which acted as a drag on the quarter overall.   The reason for the poor performance in March was due to various public sector strike action from healthcare and transport, which weighed heavily on the services sector which saw a contraction of -0.5%. The performance would have been worse but for a significant rebound in construction and manufacturing activity which saw strong rebounds of 0.7%.   There is a risk that this modest expansion could get revised away this morning, however recent PMI numbers have shown that, despite rising costs, business is holding up, even if economic confidence remains quite fragile.     One thing we do know is that with the recent increase in gilt yields is that the second half of this year is likely to be even more challenging than the first half, and that the UK will do well to avoid a recession over the next two quarters.       EUR/USD – slid back towards and below the 50-day SMA, with a break below the 1.0850 area, potentially opening up a move towards 1.0780. Still have resistance just above the 1.1000 area.     GBP/USD – continues to come under pressure as we slip towards the 50-day SMA at 1.2540. If this holds, the bias remains for a move back to the 1.3000 area. Currently have resistance at 1.2770.       EUR/GBP – currently being capped by resistance at the 50-day SMA at 0.8673, which is the next resistance area. Behind that we have 0.8720. Support comes in at the 0.8580 area.     USD/JPY – briefly pushed above 145.00 with the November highs of 147.50 beyond that.  Support remains at the 142.50 area, which was the 61.8% retracement of the 151.95/127.20 down move. A fall below this support area could see a deeper fall towards 140.20/30.    FTSE100 is expected to open 18 points higher at 7,489     DAX is expected to open 12 points higher at 15,958   CAC40 is expected to open 8 points higher at 7,320      
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Italian Industrial Production Remains Stable in September, Anticipating a Soft Economic Patch

ING Economics ING Economics 10.11.2023 12:48
Italian industrial production was stable in September September's industrial production data and October survey data suggest that the soft economic patch will remain in place over the fourth quarter, with downward pressure on goods as the only positive fallout. The soft patch in Italian industry continued in September, according to Istat’s data. Seasonally-adjusted production was flat on the month, and the working days adjusted measure was down 2% on the year. In September, production was 3% lower than at the pre-Covid peak. A quick look at big industry aggregates shows a sharp monthly decline in consumer goods (-2.2% month-on-month), offset by increases in investment goods (+1.5% MoM), intermediate goods (+0.3% MoM) and energy (+1.1% MoM). The manufacturing breakdown shows that previous patterns in yearly changes have been broadly confirmed: sectors which had been particularly penalised by supply chain disruptions such as the transport equipment industry continued to rebound, while those more exposed to developments in construction activity, such as wood and non-metal mineral products, continue to suffer. The view on the quarter, a modest 0.2% gain in production in the third quarter over the previous one, does not add anything relevant to what we already knew from the value added provided by the preliminary estimate of 3Q23 GDP. Looking ahead, high-frequency confidence data for October suggests that manufacturing weakness will likely remain in place over the last quarter of 2023. Softening orders are reportedly weighing on current and expected production, pointing to a possible negative contribution of manufacturing to value added generation over the last quarter of 2023. If this is confirmed, the stagnating economic environment looks set to persist over the fourth quarter, with a small negative growth reading remaining a possibility if services take a downward direction. The one positive feature of the ongoing manufacturing soft patch is that this adds downward pressure to goods inflation, possibly bringing forward gains in real disposable income.

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