Italian industrial production comes back to growth in October, with a small increase on a monthly basis (0.1%) but posting a more significant pick-up on a 3m/3m basis. For the second month in a row, the overall YoY rate of growth is positive (1%, prior 1.4%) after the contraction posted in July and August.
In October, the Italian industrial production, increased by 0.1% m/m; in work-day and seasonally adjusted terms this translates into a 1% y/y growth and takes the 2018 average to 1.7% y/y.
Trends remain strong in capital goods (+2.4%) and consumer goods (+2.0%) whilst weaker trends appear in the energy (-1.5%) and intermediate goods (-0.3%) sector.
Overall, should the pickup in the composite index and in the capital goods sub-component trends be confirmed by new monthly data, this would shape a slightly better outlook for the Italian economy in Q4.
Indeed, after a 0.1% QoQ contraction in the third trimester, coincident indicators so far kept warning about risks of a further shrinkage in Q4, prompting us to revise down our growth outlook.
In fact, we now expect the Italian economy to expand at 0.9% YoY this year, decelerating to 0.5% in 2019 and 0.6% in 2020. At the origin of this change, on one side the weaker than expected growth in 2H 2018, on the other, the weakening of the composition of domestic demand, where gross fixed capital formation contracted in Q3, halting the healthy growth posted in H1.