Inventories and investment drive manufacturing growth in the first four months

It is not just the inflationary effect that is driving turnover in Italian industry; according to the quarterly analysis of industrial sectors by Prometeia and Intesa Sanpaolo, in the first four months of the year recorded a 2.3 per cent increase at current prices compared with the same period last year. Even when adjusted for the ‘price effect’, the deflated figure remains positive, showing an increase of 1.1 per cent.

Production, too – despite the difficulties caused by supply disruptions resulting from the war in Iran and the closure of the Strait of Hormuz – remains at positive levels, with a 1.4 per cent increase in the March–May quarter (year-on-year), which translates into substantial stability (+0.8 per cent) over the first five months of the year. This trend is similar to that seen in France and better than the German figure, which instead shows a 3.4 per cent decline – certainly not without consequences for those Italian production sectors most closely linked to the German economy. According to the report, production is essentially driven by two factors: the recovery in investment in machinery and technology in the domestic market (it is no coincidence that the mechanical engineering sector is among those recording the best results in terms of turnover), as well as forward-looking stock planning across the supply chains, which has made it possible to absorb, at least in part, the scarcity and rising costs of raw materials.

Positive signs are also coming from abroad, where performance has been better than the international situation would have suggested, given US tariffs, growing competition from Chinese manufacturers and geopolitical conflicts: exports of Italian goods actually rose by 3.1 per cent in the first four months, at current values, and by 2.2 per cent at constant prices, driven mainly by the pharmaceutical sector and, surprisingly, by the United States. “There are certain structural factors in the Italian economy, which are often underestimated, that are managing to mitigate the effects of the many challenges of the current economic climate,” observes Alessandra Lanza, senior partner at Prometeia. “One of the main factors is that the twin transitions – environmental and digital – are, despite everything, moving forward: they are an unstoppable process and this underpins demand, particularly in a market such as the United States, where the drive for innovation is very strong. There are also certain macro-trends that are supporting specific sectors, such as the ageing population, which is fuelling growth in the pharmaceutical industry.”

Against this backdrop, the sectors that have performed best are those linked to capital goods (mechanical engineering, electrical engineering and electronics), as well as metallurgy and pharmaceuticals. By contrast, sectors most affected by rising energy costs, such as transport and food, have seen a decline.

However, business confidence is deteriorating, according to the analysis: what is causing businesses the greatest concern is the trend in prices – namely, the inevitable knock-on effect of rising production costs, passing down the supply chain to end consumers, against a backdrop of weak demand. ‘Even if a solution to the conflict in the Middle East were to be found quickly, it would be a temporary one,’ says Lanza. ‘We are witnessing a paradigm shift, which has brought an end to a world in which any crisis was managed through multilateral and globally accepted rules. Today, crises are resolved, so to speak, through bilateral negotiations at best, or through a show of force at worst.” Price levels are inevitably set to rise, and these inflationary pressures will gradually become more apparent over the coming quarters, leading to a fall in demand that will need to be addressed through a serious and structural policy of wage increases.