Sometimes events just seem to gather their own momentum in the way that a rolling stone gathers moss so let me take you straight to the Italian Prime Minister this morning.
Italy Dep PM Di Maio: Low Growth Views `Theater Of The Absurd’: Messaggero ( @LiveSquawk )
I have to confess that after the way that the Italian economy has struggled for the last couple of decades this brought the Doobie Brothers to mind.
What a fool believes he sees
No wise man has the power to reason away
What seems to be
Is always better than nothing
And nothing at all
Then the Italian statistics office produced something of a tour de force.
In December 2018 the seasonally adjusted industrial production index decreased by 0.8% compared with
the previous month. The percentage change of the average of the last three months with respect to the
previous three months was -1.1.
As you can see these numbers are in fact worse than being just weak as they show a monthly and a quarterly fall. But they are in fact much better than the next one which is really rather shocking.
The calendar adjusted industrial production index decreased by 5.5% compared with December 2017
(calendar working days being 19 versus 18 days in December 2017); for the whole year 2018 the
percentage change was +0.8 compared with 2017.
The unadjusted industrial production index decreased by 2.5% compared with December 2017.
Just for clarity output was 2.5% lower but as there was an extra working day this year then on a like for like basis it was some 5.5% lower. I would say that was a depressionary type number except of course Italy has been in a long-standing depression.
Digging deeper into the numbers we see that on a seasonally adjusted basis there was a rally in industrial production as the 100 of 2015 nearly made 110 in November 2017, but now it has fallen back to 103.9. But even that pales compared to the calendar adjusted index which is now at 93.3. So whilst the different indices can cause some confusion the overall picture is clear. We do not get a lot of detail on manufacturing except that on a seasonally adjusted basis output was 5.5% lower in December than a year ago.
The drop is such that we could see a downwards revision to the Italian GDP data for the fourth quarter of last year which was -0.2% as it is. Actually the annual number at 0.1% looks vulnerable and might make more impact if the annual rate of growth falls back to 0%. Production in a modern economy does not have the impact it once did and Italy’s statisticians were expecting a fall but not one on this scale.
Monthly Economic Report
After the above we advance on this with trepidation.
World economic deceleration has spilled over into Q4, particularly in the industrial sector, which has
experienced a broad-based loss of momentum in many economies and a further slowing in global trade growth.
In November, according to CPB data the merchandise World trade in volume decreased 1.6%.
So it is everyone else’s fault in a familiar refrain, what is Italian for Johnny Foreigner? This is rather amusingly immediately contradicted by the data.
In Italy, real GDP fell by 0.2% in Q4 2018, following a 0.1% drop in the previous quarter. The negative result is
mainly attributable to domestic demand while the contribution of net export was positive.
So in fact it was the domestic economy causing the slow down. This thought is added to by the trade data where the fall in exports is dwarfed by the fall in imports at least in November as we only have partial data for December.
As for foreign trade, in November 2018 seasonally-adjusted data, compared to October 2018, decreased both
for exports (-0.4%) and for imports (-2.2%). Exports drop for EU countries (-1.3%) and rose for non EU
countries (+0.6%). However, according to preliminary estimates in December also exports to non-EU
countries decreased by 5.0%.
Now let me give an example of how economics can be the dismal science. Because whilst in isolation the numbers below are welcome with falling output they suggest falling productivity.
In the same month, the labour market, employment stabilized and the unemployment rate decreased only
The future looks none too bright either,
In January 2019, the consumer confidence improved while the composite business climate
indicator decreased further. The leading indicator experienced a sharp fall suggesting a
worsening of the Italian cyclical position in the coming months.
Indeed and thank you for @liukzilla for pointing this out the Italian version does hint at some possible downgrades, Via Google Translate.
The data of industrial production amplify the tendency to reduce the rhythms of
activity started in the first few months of 2018 (-1.1% the economic variation in T4).
Also a none too bright future.
Data on industry orders also showed a negative trend, with a decrease for both markets in the September-November quarter (-1.3% and -1.0% respectively on the market).
internal and foreign).
Yesterday’s data provided no cheer either.
In December 2018, both value and volume of retail trade contracted by 0.7% when compared with the previous month. Year-on-year growth rate fell by 0.6% in value terms, while the quantity sold decreased by 0.5%.
Although on a quarterly basis there was a little bit assuming you think the numbers are that accurate,
In the three months to December (Quarter 4), the value of retail trade rose by 0.1%, showing a slowdown
to growth in comparison with the previous quarter (+0.4%), while the volume remained unchanged at
Actually there was never much of a recovery here as the index only briefing rose to 102 if we take 2015 as 100 and now is at 101.5 according to the chart provided. Odd because you might reasonably have expected all the monetary stimulus to have impacted on consumer spending.
This is now declining in spite of a fair bit of immigration.
On 1 st January 2019, the population was estimated to be 60,391,000 and the decrease on the previous year was
around 90,000 units (-1.5 per thousand)………The net international migration amounted to +190 thousand, recording a slight increase on the previous year (+188
thousand). Both immigration (349 thousand) and emigration (160 thousand) increased (+1.7% and +3.1%
I have pointed out many times that Italian bond yields have risen for Italy in both absolute and relative terms. Let me present another perspective on this from the thirty-year bond it issued earlier this week.
Today Italy issued 8bln 30yr BTPs. Had it issued the same bond last April, it would have received around 1.3 bilion more cash from the market. ( @gusbaratta ).
This is quite a mess in a lovely country. Also the ironies abound as for example expanding fiscal policy into an economic decline was only recently rejected by the Euro area authorities. They also have just ended some of the monetary stimulus by ending monthly QE at what appears to be exactly the wrong time. So whilst the Italian government deserves some criticism so do the Euro area authorities. For example if the ECB has the powers it claims why is it not using them?
Of course I don’t want to speculate about what contingency would call for a specific instrument but if you look at the number of instruments we have in place now, we can conclude that it’s not true that the ECB has run out of fuel or has run out of instruments. We have all our toolbox still available. ( Mario Draghi )
But just when you might have thought it cannot get any worse it has.
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