The effects of the war halt Italian industrial production which fell by 1.5% in March, after the rebound in February (+ 1.9%). This is the estimate of the Confindustria Study Center in the rapid survey. Consequently, in the first quarter of the year the CSC estimates a decrease in industrial production of 2.9% compared to the fourth quarter of 2021, which “will negatively affect the dynamics of GDP”.
Raw materials skyrocketing
The unprecedented dynamics of the prices of raw materials, with particular reference to the rise in the price of natural gas which exhibits 4-digit rates of change (+ 1,217% on average in the period of the pre-Covid conflict) and that of Brent (oil), which is in 3 figures (+ 104%), “they measure the order of magnitude of the supply shock that is hitting Italian and European economic activity”.
Falling demand
Orders to industry fell by 0.8% (in volume) in March from February, when they were down by 0.1% on January: a “very negative figure for the outlook for production since April”.
What is holding back production
After the intense drop in production recorded in January (-3.4%), the partial recovery in February is mainly due to a basic statistical rebound effect, highlights the Csc. The outbreak of the conflict, he continues, has accentuated since the end of February the incidence of the factors that hindered Italian economic and production activity, even before the war (increases in the prices of raw materials, scarcity of materials). The result, therefore, is a net worsening of the economic situation which is confirmed by the decline in business confidence recorded in March, to 105.4 from 107.9 in February, and in the decline in manufacturing PMI (to 55.8 from 58.3 in February. last month). Added to this is a significant decrease in the assessments and production expectations of manufacturing companies, the value of which has not touched such low levels since June last year.
Business concerns
The CSC also underlines that a survey conducted among the companies associated with Confindustria shows that 9 out of 10 companies in the sample consider as very important, among the main obstacles caused by the conflict, not only the increases in the cost of energy, but also those of other raw materials, while supply difficulties concern almost 8 out of 10. Faced with these problems, 16.4% of the companies that replied have already significantly reduced production. The “sentiment indices on entrepreneurial activity and confidence, which fell in March, herald significant repercussions on the effective resilience of businesses in the coming months”.