Italy industry output rises unexpectedly in December

ROME Fri Feb 10, 2012 6:11am EST

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ROME Feb 10 (Reuters) - Italian industrial output rose unexpectedly in December, data showed on Friday, contrasting with falls in German and French output and giving some analysts hope that the pace of a new recession for Italy may ease in the first quarter.

National statistics office ISTAT said Italy's output rose 1.4 percent from the previous month, way above a forecast 0.5 percent fall in a Reuters' poll of analysts and accelerating from a 0.3 percent rise in November.

"This is a very positive figure and a little surprising," said Unicredit analyst Chiara Corsa.

She said the strong output figure reduced the downside risk on her forecast for gross domestic product (GDP) to have fallen by about 0.6 percent in the fourth quarter of 2011, and underpinned her view that the pace of recession may soften in the first quarter of 2012.

Other analysts said the output rise in December appeared to be a temporary recovery.

"The index went down quite a bit, so this is a correction of the previous weakness," said Fabio Fois from Barclays Capital.

He said he still expected the economy to weaken throughout 2012 as structural reforms being implemented by the new government of Mario Monti, including deregulation, would have an initial dampening effect on growth.

The Bank of Italy said on Thursday that the economy would shrink this year by around 1.2 percent if the recent fall in borrowing costs is maintained.

The government has sought to implement a wide-ranging austerity program to convince investors Italy can service its debt pile, and is also working on measures to stimulate economic growth, including deregulation of professions and labour reform.

Robust increases in production of consumer and investment goods helped boost December's figure.

The data follows Italian purchasing managers' indexes which showed the manufacturing and service sectors contracted at a slightly slower rate in January.

The jump in Italian output contrasted with a 2.9 percent drop in industrial output in Germany, the euro zone's largest economy, and a 1.4 percent decline in French output.

Germany, France and Italy make up at least two-thirds of the euro zone's economic output.

Over the whole of 2011, Italian output was flat compared to 2010, ISTAT said.

On a work-day adjusted year-on-year basis, output in December declined 1.7 percent, compared to a 4.1 percent fall in November. (Reporting By Catherine Hornby)

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