Italian voters, who are being wooed by campaign promises before next month’s general election, got the first of a series of economic snapshots showing the state of the country’s recovery, and the news was better than expected.
December industrial output rose the most in almost two years, the national statistics agency said Friday. In the last month of 2017 Italy’s production increased 1.6 per cent or twice the median forecast in a Bloomberg poll of 23 analysts. That was the biggest monthly rise since January 2016.
“It’s very good data allowing Italy to get off a good start to 2018,” said Luca Mezzomo, head of economic research at Intesa Sanpaolo SpA in Milan. “It shows investments are fully back, chiefly those in machinery with a rising demand internally and even from abroad despite the strong euro — all this benefits business confidence and ultimately should make households more optimistic.”
Italy’s FTSE MIB Index of stocks fell 0.5 per cent as of 12:21pm. Rome time. The country’s 10-year bond yield was little changed at 2 per cent as its spread with equivalent German bunds widened 3 basis points to 126 basis points.
More economic data is on its way even closer to March 4 general elections. On February 14 the agency will release preliminary gross domestic product data for the fourth quarter, followed by full-year 2017 GDP figures just three days before the vote.
The industrial output data were in stark contrast with a monthly note posted earlier in the week by the statistics agency saying a “less intensity” marked the country’s economic activity in late 2017 and early 2018. On Wednesday, the European Commission said Italy’s economy will likely expand about 1.5 per cent this year, the slowest pace in the 19-nation euro area, adding that the country suffers from “limited growth potential.”
The Brussels-based commission said that to obtain the projected 2018 economic expansion, the Italian government will need to keep implementing agreed-upon reforms and “prudent fiscal policies”
With polls pointing to a hung parliament after the vote, rival parties have been warning of chaos or even repeat elections.
Luigi Di Maio, 31, head of the anti-establishment Five Star Movement, branded ex-premiers Matteo Renzi, of the ruling Democratic Party, and Silvio Berlusconi, leader of the centre-right bloc, as “irresponsible” because, he said in a Facebook post Thursday, they had tried but failed to pave the way to forming a government together.
Both Renzi and Berlusconi have denied they would form a so-called grand coalition if the vote proves inconclusive, calling for a new election instead. With no force seen achieving a majority, the centre-right coalition led by Berlusconi is the biggest such bloc in surveys. Five Star is the biggest single party, trailed by the centre-left Democrats.
Speaking on Friday, Berlusconi said current Prime Minister Paolo Gentiloni should stay on as prime minister if no group wins a parliamentary majority.
“We will have no choice but to keep going with this government and go to a vote with this government, perhaps with a better electoral law even if I don’t know whether there would be a majority to change it,” the former premier said.
Any political instability after the elections could spook markets and threaten the economic reforms.
“Italy cannot afford to interrupt its reform path and squander the results it obtained as that would mean returning to a state of crisis and uncertainty,” Gentiloni said on Thursday at an economic conference in Turin, an industrial centre in the north. “We can’t afford that and we won’t let it happen,” he added.
Gentiloni also cited the need for a “gradual reduction in the public debt” which at about 132 per cent of GDP is the euro-region’s second-biggest after Greece.