Italy on brink of RECESSION: Fears over Rome economy as manufacturing sector SHRINKS

Gloomy figures released today show factory activity in Italy was recorded below the line of growth at 49.2 for December. While this is up from the 48.9 forecast by economists, it is still under the 50 needed to record an upward trend. Andrew Harker, associate director at IHS Markit, said: “There appears little sense of optimism that the current soft patch will come to an end in the near future.” Italy’s economy contracted in the third quarter for the first time in four years back in November with gross domestic product (GDP) falling 0.1 percent in July to September.

If another slowdown is recorded for the final three months of 2018, Italy will officially be in its third recession since the global financial crisis more than a decade ago.

A recession is defined by economists as GDP falling for two consecutive quarters.

Speaking at the time of the data release, Andrea Montanino, Confindustria’s chief economist of employers, said: “It’s a worrying figure that could lead us to technical recession in the last quarter of the year.

“We are forecasting a flat fourth quarter with downside risks due to falling confidence indices.”

Italy has been rattling global markets in recent months as Rome spent much of 2018 at loggerheads with European Union (EU) finance chiefs over its controversial budget.

The crisis-hit nation passed the 2019 budget just before a year-end deadline, averting a major showdown with Brussels after being accused of breaching spending commitments.

Italy re-drafted the budget and cut the deficit next year to 2.04 percent of gross domestic product after Brussels rejected its original target of 2.4 percent.

For 2019, the deficit is set at 1.9 percent.

The government comfortably won a vote of confidence on the budget over the weekend in the Chamber of Deputies by 327 to 228.

Last month a Goldman Sachs report claimed Rome would “flirt with recession at the start of next year” if the dispute with the EU remained “unresolved”.

The paper, entitled ‘Landing the Plane’, goes on to accuse Rome of “casting a dark cloud” over Europe and labelled Italy as one of the key risk factors looming over the European market for 2019.

Meanwhile, in broader eurozone news, manufacturing activity for the bloc came in today at 51.4 from November’s 51.8.

The figure matched a flash reading but barely above the 50 level separating growth from contraction.

It marks its lowest reading since February 2016 but an index measuring output, which feeds into a composite PMI that is seen as a good gauge of economic health, nudged up to 51.0 from 50.7.

Chris Williamson, chief business economist at IHS Markit, said: “A disappointing December rounds off a year in which a manufacturing boom faded away to near-stagnation.”

source: express.co.uk