Cars (-40%) and fashion slow down industrial production: -3.6% year-on-year in October

The only good news is the 'breakeven' compared to the previous month, with industrial production in October presenting a round zero in the seasonally adjusted figure. Hardly a consolation, bearing in mind that on an annual basis there was a 3.6% drop, the umpteenth, bringing the number of consecutive months of decline to 21. A drop that consolidates the negative balance of 2024, at this point down 3.3% in the first ten months of the year. A figure that is unlikely to improve in the last part of 2024, characterised by increases in companies' requests for redundancy payments and early shutdowns for the Christmas break, the most immediate way to adjust supply to reduced demand.

Food and electronics (the latter sector by a handful of decimal places) are the only manufacturing sectors in positive territory, against a long sequence of minus signs culminating, as has been the case for some time now, in textiles-clothing and transport equipment.

The latter (-16.4%) sunk by the auto, which on an annual basis plummeted by 40%, thus almost halving the October 2023 output. For the fashion this is an established slowdown, and since the beginning of the year the drop is 10.5%, worse than for transport equipment. Electrical equipment, chemicals (+0.1%) and food are the only positive sectors in 2024.

The net negative contribution of industry (-0.7% in the third quarter) is, moreover, one of the reasons that prompted Istat to halve its estimates for Italian GDP growth in 2024 (+0.5%). A product that finds partial support in domestic demand, but above all in net foreign demand, where it is nevertheless the drop in purchases that is the diriment aspect. The difficulties in international sales are in fact one of the key issues for our manufacturing industry, which now derives more than half of its turnover, more than 600 billion per year, from abroad on average. Exports that in current values have fallen by over three billion lire (-0.7%) in nine months, with the feeling that at the end of the year, given the worsening trend, the balance could be even worse. The epicentre of the problem is Germany, the first outlet market for our goods, a country that has been oscillating between recession and stagnation for some time now and that has so far subtracted EUR 3.1 billion of turnover from our exporters during the year, for a transversal drop that affects several sectors, in more than one case with double-digit reductions. Mechanics, plants, and components are paying the price of stagnation in the automotive sector (German production has grown by 1% in 11 months, while registrations have come to a standstill), but also of a vertical drop in the building industry (building permits in September are at their lowest level since 2010), a slowdown that is dragging down a large sector. A downward trend that shows no sign of reversing, with industrial production in October dropping yet again; one point compared to September, 4.5% in the annual comparison.

In addition to the collapse of the auto industry and the current slump in the textile-clothing sector, there is also a slowdown in the vast area of instrumental mechanics (-4% in the month, -4.2% between January and October), which is paying on the domestic market for the delays and complexities of the Transition 5.0 measures. Formally able to act counter-cyclically with a powerful push and to disburse over six billion tax credits, but at the moment only three per cent of this potential is exploited. Pending an understanding of whether and when the changes anticipated by Mimit will materialise, more than a year after the measure was first announced, the negative result is evident not only in companies' order portfolios (unloaded) but also in the same ISTAT surveys, which for the third quarter show an annual drop of more than six points in investments in plant and equipment, the maximum experienced since the days of Covid, with a gap in current values of 2.7 billion compared to the same period of 2023. A fall that leads to forecast growth of just four decimal points for total investment in 2024, from a jump of almost nine points the previous year. A scenario of uncertainty that translates into a continuous fall in confidence indices (for businesses we are at the lowest since 2021), negative expectations on production, close to the levels seen during Covid, and an estimate of capacity utilisation at 75%, never so bad for four years. If investments are lacklustre, consumption is holding up, also being able to count on additional resources linked to the record level of the workforce, which translates into an enlarged payroll and thirteenth month's pay. This prompts Confcommercio to predict a jump in December spending as well as a positive impact on the whole of 2025. An employment picture that could, however, change rapidly in light of the requests for redundancy funds coming in from companies, which have jumped 23% in nine months, with an increase of almost 50% for mechanics and values that have more than doubled for textiles-clothing. Early closures in view of the festive season, partly using holiday pay, will help in the immediate future to deal with the oversupply. In the hope that in January the market will at least partly be different.