ROME (dpa-AFX) - Italy's factory sector continues to struggle and is likely to give lacklustre performance even in the fourth quarter, thanks to the weakness in the consumer goods industry as high inflation damps consumption, ING economist Paolo Pizzoli said in a note on Wednesday.
Latest official data showed that the Italian industrial production rose 1.2 percent month-on-month after a 1.3 percent contraction in August. Growth was led by capital goods and intermediate goods, while production of consumer goods and energy shrunk.
However, production fell 0.4 percent quarter-on-quarter in the third quarter and was 0.1 percent less than a year ago. The quarterly decline was offset somewhat by the growth in capital goods production and a strong demand for transport equipment. The rest of the categories including consumer goods and intermediate goods logged declines.
'The combination suggests that Italian manufacturing is still struggling to establish a broad-based recovery,' Pizzoli said. 'The September bounce eliminates part of August's decline, and the strength in capital goods is an encouraging signal for investment-related activity.'
The quarterly decline in output over the third quarter was consistent with the unquantified fall in industry value added signalled by the preliminary GDP estimates, the economist said.
Citing the business confidence data, the economist reckoned that chances of an order-driven gradual recovery seem concentrated in the capital goods domain. Meanwhile, slightly increasing inventories signal no urgency in accelerating production for re stocking.
'With energy costs still extremely elevated, barring positive surprises from external demand, a flattish profile for aggregate production over the fourth quarter looks likely,' Pizzoli concluded.
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