Italian industrial production falls sharply in January

Italian industrial output fell back at the start of the year, amid sharp drops in the production of durable consumer goods and capital goods but above all in energy.

Total output fell by 1.9% month-on-month in January, according to ISTAT, versus forecasts calling for a dip of just 0.3%.

By categories, production of consumer goods was flat when compared with the previous month, but within that, whereas output of non-durable consumer goods increased by 1.0% on the month, that of durables fell by 5.6%.

Output of capital goods meanwhile shrank by 1.6% on the month, while that of intermediate goods declined by 0.9%.

Production of energy goods meanwhile fell by 7.0%.

Versus a year ago, and in calendar-adjusted terms production was 4.0% higher.

In December, total industrial output grew 2.1% month-on-month, ISTAT said, marking an upwards revision from the preliminary reading of 1.6%.

By industry groups, Mining output fell by 3.5% when measured against January, factory production by 1.4% and Utility output by 8.6%.

Despite Monday's negative surprise, Loredana Federico at UniCredit Bank told clients it would be "premature to read too much" into the significant decline in industrial production.

The reasons were twofold. Firstly, the declines in some sectors followed significant jumps during the prior month and secondly, the weak headline print was maintly the result of a poor performance in energy.

"Nevertheless, it is worth highlighting that our IP call for the rest of the quarter mainly hinges on our expectations that global demand has continued to expand in 2018 at a similar pace to that seen at the end of 2017, together with our projection for a continued moderate expansion in domestic demand – Italy’s retail PMI was back to 50.4 in February, after a blip of 47.3 in January," she said.

"Currently, potential headwinds might mainly come from global trade and the potentially negative consequences related to President Trump’s protectionist stance."