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As the auto sector slows down, industrial turnover records worst result since 2013

by Luca Orlando

Growth in the auto sector is slowing. The first negative sign in more than two years for industry sales coincides with the nation’s worst overall showing in industrial turnover since August of 2013: sales fell 3.6% in March year-over-year.

Actually, it’s no coincidence. Because autos have been driving ISTAT averages higher for some time: they were behind 70% of the growth in industrial turnover in 2015.

The decline is also apparent in monthly comparisons. In March, revenue fell 1.6% on a seasonally-adjusted basis. The month-on-month slowdown was due mainly to the domestic market (down 2.6%), while year-on-years comps show dueling declines—of 4.4% domestically and 2.2% in foreign sales.

The only positive exception was consumer durables, which rose 4.6%.
Otherwise, there were only negatives, with energy once again the worst performer, down 24.8%. By sector, pharmaceuticals, rubber-plastic, electronics and transportation (except for autos) rose but their positive performance was more than offset by widespread declines, with a decrease of more than 9% for metals and textile/clothing and dips in machine tools, food, chemicals and electrical equipment.

According to ISTAT, revenue tied to the auto sector retreated in March by 6.5% on an annual basis and the comparison is negative also for the first three months of the year as revenue was down 3.3%.

Looking ahead, the overall picture isn’t particularly bright in terms of orders, which are down by 3.3% month-to-month (due largely to a 5.6% drop overseas) and positive by only one decimal point year-on-year thanks to new contracts for various forms of transportation other than auto.

Meeting the targets of leading research firms (Intesa Sanpaolo and Prometeia forecast an uptick of 0.9% for 2016 revenue at current value) will require a decisive acceleration of growth in the months ahead. But there’s more than one overhang to that scenario, starting with the situation of exports, which is feeling a squeeze from the slowdown in global trade, and the criss of BRICS nations.

In fact, ISTAT noted that in April sales to non-EU nations fell 3.6%—the fourth consecutive drop.

But the performance of the manufacturing sector, not considering energy, after all was not so bad, it grew by 3.9% month-on-month.

Between January and April, revenue from non-EU nations fell 4.8%, which equates to €2.9 billion less. China, India, Brazil continue to buy less, as does Russia, where turnover fell by 9.3%. At this rate, sales to Russia will fall by just over €6 billion in 2016, down 42% from a peak in 2014.

Sales to the Middle East, central Africa and Japan are also weaker, with the U.S. the only positive exception. Unfortunately, growth there of 11.7% for the month, tied to the acquisition of ships, is by definition a one-time event.