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The Long Read: Recovery is slow, but the patient is not dead

by Paolo Bricco

The recovery is slow. But the patient—Italian industry—is not dead. That's despite a deep recession that eroded its plants and apparatus and its manufacturing muscle, first atrophying and eventually eliminating one-fifth of its production capacity since 2008.
The patient has strong bones. It has started wake up. Specifically, the heart, the will to plan for the future, seems to have started to beat again at a pace that's increasingly less feeble and more constant.

It's still to early to tell when this patient will once again stand up and start walking with a brisk step. It's better to be cautious when dealing with this kind of historic shift.
Since 2008, official economic statistics trace a sort of medical chart of a very unusual patient. Daily figures have provided a framework, both erratic and systemic, of the physiology of Italy's economic fabric. What's certain is that despite a series of shocks, it has preserved its core strategic base.

We are still, proudly, a nation of factories and laboratories. Whatever happens in the factory, happens in the nation. What's good of for the factory, is good for the country.
July data, showing an acceleration from the average of 0.7% in the first seven months of the year, must not be underestimated— even if industrial production falls under the statistical profile of one of the more “volatile” measures, so must be managed carefully.
This increase is fed by two identical and structural elements of the Italian economy, of its history and its future.

In the first place, there was a 5.3% increase in capital goods, that combination of technological knowledge and industrial machinery though which we Italians modernize and restructure urban areas and develop local networks at home and in other European nations, on one hand. On the other hand, we help build the industrial infrastructure of emerging nations.

In the second place, transportation grew by 20.1%. A jump due to the revamp and manufacturing relaunch of Fiat Chrysler Automobile's Italian plants, which, at year end, if they keep up the rhythm of the first seven months of the year, could nearly double the number of cars produced in 2014.

These positive signs deserve to be greeted with cautious optimism. They are fundamental because they appear to be the statistical manifestation of a desire by small and mid-sized businesses not to stay sunk in depression, and to demonstrate Italy's key role for a big company like FCA.

Sticking to the medical metaphor, if an economic recovery is equivalent to a return to total health, the patient still needs to be monitored.

First, because the pathology dating back to 2008 was extremely serious. And secondly because — for an export-oriented economy like ours — the risk from China still needs to be decrypted in terms of its impact on international trade.

Certainly, there are powerful drugs available. The price of oil is at bottom. Interest rates are at an all time low. And these medicines go hand in hand with government reforms and with a modernization drive by the nation's political and business classes.