December 10, 2013 / 11:42 AM / 6 years ago

Italian economy shows recovery signs, France disappoints

ROME (Reuters) - Italy’s economy stagnated in the third quarter after two years of contraction, but a firm rise in industrial output in October reinforced expectations of a return to growth in the last three months of the year.

Enrico Letta, Italy's Prime Minister, speaks at the New York Stock Exchange before ringing the Opening Bell in New York, September 25, 2013. REUTERS/Chip East

France continued to falter, however, with data on Tuesday showing industrial output fell for a second straight month in October, although manufacturing production rebounded.

National statistics bureau ISTAT revised up a preliminary estimate to show Italy’s gross domestic product was unchanged in July-September, after originally reporting a 0.1 percent fall, but warned the economy was by no means out of the woods.

“From a technical point of view this data is not sufficient to say the recession is over,” a spokesman said. He added that before rounding, GDP had shown another marginal decline in the third quarter.

On a year-on-year basis, the economy shrank by 1.8 percent in the third quarter, slightly less than a preliminary estimate of 1.9 percent contraction.

The economy was supported by strong inventory accumulation but trade subtracted from growth, with imports growing much more than imports. Consumer spending continued to contract and investments dropped sharply.

Hopes that stagnation could turn to growth in Italy before the end of 2013 were supported by data showing industrial output rose 0.5 percent in October, the second increase in a row and the strongest gain since January this year.

But industrial output, which is usually closely correlated with GDP in Italy, was still down 0.3 percent in the three months to October compared with the three months to September.

Protracted stagnation and recession mean Italian industrial output is now around 25 percent lower than its peak in 2008.

On a work-day-adjusted basis, Italian factories produced 0.5 percent less in October than a year before, the 26th consecutive fall but the shallowest in the long series of declines.

In France, where GDP contracted by 0.1 percent in the third quarter, industrial output fell 0.3 percent in October, confounding market expectations of a modest rise and following a fall of the same size in September.

The fall in French industrial output was mainly a result of weaker energy production amid warm weather, with the pick-up in manufacturing offering a hint of future improvement.

In the three months to October, output fell 0.6 percent from the previous three months, French statistics agency INSEE said.

Reporting by Gavin Jones and Leigh Thomas; Writing by Gavin Jones; Editing by Catherine Evans

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