Here is a note I received by email from Barclays Capital regarding Italian GDP and Industrial Production …
Italy: September IP declined 4.8% m/m (BarCap: -4.0%, consensus: -3.0%)
Italian IP declined 4.8% m/m in September, weaker than our below-consensus expectation of -4.0% m/m (market: -3.0% m/m), from an increase of 3.9% m/m in August, downwardly revised from 4.3% m/m previously.
As we had highlighted when the previous report was released, the sharp increase in August IP would prove temporary and correct in September. Italian industrial output tends to be historically quite volatile in August for technical reasons such as the process of seasonal adjustment undertaken by the ISTAT statistics office (for more on this please read: Italy: IP surged in August but past experiences suggest there is little to get excited about).
Accounting for the revision to the index, Italian IP is reported to have contracted -0.1% q/q in Q3, below our initial expectations, suggesting a small downside risk to our expectation that Italian GDP had declined 0.2% q/q in Q3. As our GDP indicator shows, Italian GDP might have declined as much as 0.3% q/q. On this specific point, the Italian statistics office ISTAT will not release the preliminary GDP growth for Q3, but it plans to release the final Q3 figure on 21 December.
Italian Economy is Toast
The Italian economy is toast and that is before the “Rise of the Technocrat Borgs” who will make matters much worse. Please see Beware the Technocrati; The Next Delusion is Technical Government; Borg Cannot Save Europe.
Expect Krugmanites to Howl at Moon
Italy desperately needs structural reforms especially the ability for corporations to fire people much easier than they can now. Long-term, reforms will make Italy more competitive. Short-term, reforms coupled with austerity measures will add so much pain (not that it takes that much) that the vast army of Krugmanites will howl at the moon.
Also bear in mind there have been no reforms that have started yet, only promises to make reforms. Things in Italy are about to get much worse, and Italy is already in recession.
Mike “Mish” Shedlock
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