Ital­ian econ­omy ex­pands barely below es­ti­mates

The Pak Banker - - COMPANIES/BOSS -

Italy's econ­omy ex­panded in the fourth quar­ter below econ­o­mists' ex­pec­ta­tions and at the slow­est pace in a year, prompt­ing con­cerns that the re­cov­ery from the coun­try's long­est re­ces­sion since World War II might fal­ter in com­ing months.

Gross do­mes­tic prod­uct rose 0.1 per­cent in the three months through De­cem­ber, Rome-based sta­tis­tics agency Is­tat said in a pre­lim­i­nary re­port on Fri­day. That was below the 0.3 per­cent es­ti­mate of 22 an­a­lysts in a Bloomberg sur­vey. GDP ex­panded 1 per­cent from the same quar­ter of 2014 while its non-sea­son­ally ad­justed growth last year was 0.7 per­cent, the re­port said.

"Data are weaker than what we ex­pected and sig­nal a po­ten­tial lack of re­bound in in­vest­ment ac­tiv­ity, which is a key fac­tor in sup­port­ing a sus­tain­able re­cov­ery," said Gi­ada Giani, an econ­o­mist at Cit­i­group Inc. in Lon­don. "Growth sig­nif­i­cantly slowed down dur­ing 2015, pos­ing down­side risks to our fore­cast for eco­nomic growth this year."

In­dus­trial out­put in the euro re­gion's third-big­gest econ­omy fell for a se­cond month in De­cem­ber as com­pa­nies grew pes­simistic about the out­look for man­u­fac­tur­ing ac­tiv­ity de­spite lim­ited im­prove­ments in both la­bor mar­ket and con­sumer de­mand. Weaker than ex­pected GDP growth and price dy­namic might jeop­ar­dize Prime Min­is­ter Mat­teo Renzi's goal of re­duc­ing the GDP ra­tio of Italy's pub­lic debt which climbed in Novem­ber to 2.21 tril­lion euro ($2.49 tril­lion).

De­lays in the plan for sale of state-owned as­sets might make that tar­get even more dif­fi­cult. On Thurs­day a Trea­sury of­fi­cial said the govern­ment might re­view the plan size and con­tent af­ter re­ports say­ing the Ital­ian rail­way com­pany is set to post­pone an ini­tial pub­lic of­fer­ing sched­uled for this year.

Still, Fi­nance Min­is­ter Pier Carlo Padoan said in an in­ter­view ear­lier this week that the debt-to-GDP will de­cline in 2016 "given the real growth and pos­si­bly given a bit more in­fla­tion, that is be­yond our con­trol of course." Padoan cited Feb. 4 fore­casts by the Euro­pean Com­mis­sion say­ing that the ra­tio will drop to 132.4 per­cent this year from 132.8 per­cent in 2015, mark­ing the first de­cline af­ter eight years of growth.

Re­flect­ing in­vestor con­cerns on the euro re­gion's higher-debt na­tions, the yield dif­fer­ence, or spread, be­tween Italy's 10-year bonds and equiv­a­lent Ger­man bunds climbed to 153 ba­sis points on Thurs­day, up from 126 ba­sis points at the end of last week.

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