Italy Economy Real Time Data Charts

Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Italy related comment. He also maintains a collection of constantly updated Italy economy charts together with short text updates on a Storify dedicated page Italy - Lost in Stagnation?

Monday, April 27, 2009

Italian GDP Falls An Annualised 9.6% In The First Three Months Of 2009

Italy's recession deepened at the start of 2009, with first-quarter gross domestic product falling to its worst level since at least 1980, confirming the impression that Europe's fourth-largest economy is now headed for its worst downturn since World War II. Preliminary data from the national statistics office (Istat) show that Italian GDP fell 2.4% in the first quarter when compared with the last quarter of 2008. This follows a downwardly revised 2.1% contraction in the fourth quarter of last year. Annualised this means a 9.6% contraction rate during the three months, which is very high indeed.

Year on year GDP fell by 5.9%, which was also the sharpest drop since Istat's most recent data series starts in 1980 - or for at lest 29 years. The contraction was even worse than analysts were predicting, with the consensus having been for a 1.8% drop on the quarter and a 5% one on the year.

According to ISTAT, even if GDP stays flat for the remaining three quarters of the year, 2009 GDP will contract by 4.6%. According to my rough calculations, Italy's GDP was on about the same level this quarter as it was in the first three months of 2005, and from here we are travelling back in time.

But GDP is not remaining flat, even if the pace of contraction seems to have slowed in the present quarter.

PMIs Show Continuing Contraction - Although The Rate Eased In April

Italy continued to register the steepest overall fall in retail sales in the Eurozone in April according to the Bloomberg Retail PMI. The month-on-month sales index did however rise from 41.9 in March to 46.8 giving the slowest rate of decline since October 2007. Retail sales have now fallen for 26 months consecutively according to survey data.

Manufacturing Output Falls

Italy's manufacturing business shrank at its slowest rate for six months in April, with the latest Markit/ADACI survey producing a headline PMI reading of 37.2 - significantly above March's record low of 34.6 and beating the consensus forecast of 36.5.

In addition other recent data suggest that the lowest point may have been past with business confidence improving in April (following 10 consecutive monthly falls), and consumer morale hitting its highest level in 16 months. However Markit reported that about 40 percent of companies in the survey reported new order levels continued to fall during the month, even though at the slowest rate of decline in seven months. Output fell at its slowest rate since October, with the sub-index jumping to 35.9 in April from 32.8 in March. Overseas orders, even though they fell less sharply in April, still clocked up their 14th successive month of decline, with Markit noting that demand was particularly weak from Eastern Europe and Russia.

And job losses in Italy's manufacturing sector showed no signs of letting up and were running at the second fastest rate in almost 12 years of data collection following the record low hit by the employment index in March.

However, saying that the "darkest hour" in this contraction may be over is not the same thing as saying that recovery is anywhere in sight. Italy's manufacturing PMI has now not indicated growth since February 2008 and forecasts generally expect the economy to contract by around four percent this year, making for two straight years of continuous contraction for the first time since World War Two. Indeed, the Organisation for Economic Cooperation and Development has even already pencilled in a potential further contraction for 2010, which if realised will mean Italy's economy will have been shrinking for an almost unprecedented 3 years continuously.

As Does Services

Italian service sector activity contracted for the 17th consecutive month in April although at the slowest rate for six months. The Markit/ADACI Purchasing Managers' Index rose to 42.0 from 39.1 in March, but still is not that far above the record low of 37.9 recorded in February. Activity has now been stick below the 50 mark that separates growth from contraction since November 2007.

The survey showed new business shrinking for the eighteenth straight month in April, though the rate of decline eased for the second month running, while expectations of business in a year's time rose to an eight-month high. As elsewhere, while optimism is rising Markit did point to record job losses as a likely on consumer spending looking ahead, making hopes of a swift recovery extremely premature. The employment sub-index fell to 44.0 from 44.6, as firms cut jobs at a survey record rate in response to the ongoing loss of business. The survey is thus consistent with other recent indicators that have pointed to an economy still mired in the deep recession that began in spring of last year, but with some grounds for thinking that the lowest point may now have been passed.

Deflationary pressure remained evident with service firms cutting their prices for the seventh month running and at the fastest rate in the survey's history in response to weak demand, while input prices showed no monthly increase for the first time since the survey began. The Italian government slashed its economic forecasts last week, and now project gross domestic product to fall by 4.2 percent this year following last year's 1.0 percent decline. The International Monetary Fund is more pessimistic, forecasting a 4.4 percent fall this year and a further drop of 0.4 percent in 2010. Italy thus now possibly faces three years of economic contraction one after the other although previously the country had not posted two consecutive years of falling GDP in its entire post-war history.

Business and Consumer Confidence Rebound Slightly

Italian consumer confidence rebounded slightly in April and reached its highest level since December 2007 as the lure of slowing inflation seemed to offset concerns about rising unemployment. The Isae Institute’s consumer confidence index rose to 104.9 from 99.8 in March.

Italian business confidence also rose as companies saw signs of an increase in orders of goods and services following the sighting of green sprouts everywhere except under our noses. The Isae Institute’s business confidence index climbed to 64.2 from a revised 60.9 in March.

Industrial Output

Industrial output simply declined and declines, and fell in March for an 11th consecutive month. Output dropped a seasonally adjusted 4.6 percent from February, when it fell a revised 4.6 percent, according to data from the national statistics office. From a year earlier, adjusted production fell 23.8 percent. Fiat has laid off about half of its 78,000 national workforce in using temporary state-subsidized programs. Sales of their cars fell 16 percent in Italy in the first quarter, according to data from the trade association ANFIA.

Exports Remain Very Weak

Italy's trade deficit increased dramatically to 837 million euros in February, almost double the 449 million euros recorded in the same month in 2008. Istat said a fall in demand was recorded in all sectors, but the automobile sector was particularly hard hit with a fall in exports of 46 percent. Trade in the chemical sector was down 29.5 percent, electrical goods were down 27.3 percent and exports of other manufactured goods fell by 22.7 percent.

Imports were down by 25.3 percent at 24.3 billion euros while exports were down by 23.7 percent at 23.5 billion euros. The results, however, were slightly better than in January, when imports were 23.4 billion euros and exports 19.8 billion euros. This was effectively the worst decline in exports since these statistics were first compiled by ISTAT in 1993.

No End To The Recession In Sight
Italy effectively entered recession in third quarter of 2008, and the economy now looks bound to shrink the most in more than half a century this year. The International Monetary Fund forecast on April 22 that the jobless rate will reach 8.9 percent this year and 10.5 percent in 2010. At the same time, Italian inflation has been slowing and hit a record low of 1.1 % in March, so if the contraction continues the deflation threat is real and present.

According to the latest EU Commission forecast Italy’s gross domestic product will fall this year by 4.4 percent, more than twice the 2 percent it predicted three months ago. This is bound to have a substantial impact on government debt, and the Italian government already accepts that the budget deficit will rise this year and breach the European Union limit of 3 percent of GDP. Government spending climbed 21 percent in the first quarter from a year earlier, while revenue fell 4.8 percent, the Bank of Italy said on May 13. The EU Commission forecast a deficit of 4.5% of GDP this year and 4.8% in 2010. As a result gross government debt is projected to climb from 105.8% of GDP in 2008 to 113% in 2009 and 116.1% in 2010. A grim picture, and no easy solutions.


Hynek Filip said...

So we are going back in time in terms of output and fast forward in terms of public debt versus GDP.

It seems now that at the end of 2009, the public debt/GDP ratio in Italy will not only reach 110%, but will most likely soar above 115, or even 120%. What the figure will look like as at end 2010, perhaps god only knows.

The obvious question: is there any realistic way to stop this, and if there is not, what is likely going to happen?

paolo said...

"Annualised this means a 9.6% contraction rate during the three months, which is very high indeed."

I'm sorry for asking a dumb question, but how comes the 9.6 figure? I haven't seen it elsewhere, and I doubt 2.4* 4 = 9.6 makes sense.

Edward Hugh said...

Hi Paolo,

"I'm sorry for asking a dumb question, but how comes the 9.6 figure?"

Like you surmised, by multiplying the quarterly contraction rate by four. That is to say, if this was repeated all year the Italian economy would shrink by 9.6%.

"I haven't seen it elsewhere,"

Well, I'm not surprised. US GDP data is standardly produced in this form, but in Europe we tend only to use it when growth is positive, since it makes the number look good. When we contract we don't do this, since probably people think it looks bad, and that may be bad for confidence, etc etc, and since they are busy trying to talk the thing up (which I don't think you can do) they don't quote it much in the European press.

But from a technical point of view - which is what this blog is all about - it is an accurate measure. It indicates the severity of what is happening, and gives us a base to work forward from, as the contraction slows. So we can better see what is happening.

It is much more useful than the 5.9% year on year number, which is simply a statistical construct, and tells you more about previous quarters than the present one.

"and I doubt 2.4* 4 = 9.6 makes sense."

Well, I hope it makes a bit more sense now.

Edward Hugh said...

Here are some examples from reports about the US case:

Q1 2009

The United States Gross Domestic Product (GDP) plunged at an annualised 6.1%, after shrinking by 6.3% in the last three months of last year, according to a report released by the US Commerce Department, making the ongoing recession the worst in at least fifty years.

The report was released just hours before Federal Reserve officials were scheduled to convene to decide how much money to insert into the economy.

The GDP has now fallen for three quarters in a row for the first time in almost forty years. The decline is worse than the average 4.7% drop forecast by economists.


The U.S. economy grew in the third quarter at an even faster pace than originally reported, the government said Tuesday.

Gross domestic product (GDP), the broadest measure of economic activity, grew at an 8.2 percent annual rate, the fastest pace since the first quarter of 1984, the Commerce Department reported.


Economic growth in the United States surged to an annual rate of 4.8 per cent in the first quarter of 2006, its best performance in more than two years, the US Commerce Department said today.


paolo said...

Many thanks.

And I'm sorry if ever my "makes sense" sounded impolite, just bad commands in English, without anything else intended.

Thank you again for answering and so fast.

Edward Hugh said...

Hi again Paolo,

"And I'm sorry if ever my "makes sense" sounded impolite,"

Oh, don't worry at all, it didn't :)

"Thank you again for answering and so fast."

Well, I'm working online this afternoon. Going through the latest data on Slovakia. An economist's vice :).

Good luck to you.

Piazza Armerina said...

I, for one, find this to be wonderful news. The faster the Italian economy downsizes, the faster the country will change, and change (even negative) is exactly what Italians need.

But like so many things Italian, the downfall will probably take a lot longer than needed.

Miami is slow these days, but it's a dynamic powerhouse compared to the "Stagnating Oldies of Italy".

...Guess I won't be going home for a while. Argentina is turning in a better performance than Italy.


At least Silvio's wife has had enough. At least one Italian citizen is interested in PROACTIVE change, instead of the average Italian response of whining and complaining that "it's the system's fault" and "there's nothing we can do", or "the people in power keep us down", therefore "we just need to enjoy life, avoid work, and eat pizza".

Besides, did we not build the western world? We have worked too much, now it's time to rest.

Let the economic downsize continue!

Robin Boast said...


You have gone very quite this last month. I rely on you as my only really accurate picture of the Italian economy. Please, don't give up.

Giuseppe said...

quoting Piazza Armerina:

"I, for one, find this to be wonderful news. The faster the Italian economy downsizes, the faster the country will change, and change (even negative) is exactly what Italians need."

You are right indeed, we Italians need to change our society in many of its facets. Nevertheless, change, especially when it's dramatic, brings a great deal of pain.

Now, I am not an economist, therefore I might say something inaccurate here, but if the matter at stake, as I understand it, it is the sustainability of the public debt then the price paid for the state going bankrupt would be huge.
Furthermore the price would be paid by the middle lower class made of employees/workers who have never been able to evade income taxes like entrepreneurs and self-employed in general, largely do in Italy.
These middle lower class would loose possibly many of their savings considering that it was and I believe it is still common for people in Italy to invest in Italian state bonds. Further, they would suffer dramatic cuts to the welfare state and if things don’t change substantially they would be again the major contributors, in proportion to their income, to the state’s finances. Again the upper class which has led the country to this disaster would get away with it pretty easily. Even in the case of a mandatory withdrawal from bank accounts, as a form of tax, as the Amato’s government disposed (in ‘92?), many of the Italian elite would have, I imagine, stored their treasures in foreign bank accounts.

I have already immigrated in the UK, because I couldn’t find a job in Italy but this doesn’t spare me from the bitterness of seeing my country sinking further and further while the people directly responsible for this NEVER pay.